The bank must reach some level of capital requirement to make this loan. In other words, if the bank does not have enough reserves, they cannot make this loan.
The bank can use customer deposits as part of their reserves. They can also borrow from another bank (presumably, paying them interest). Lastly, i think central banks also have a reserve borrowing method (but not sure about this).
> bank must reach some level of capital requirement to make this loan
No, they don’t. We force them to through fiat. But credit isn’t created from money—credit is money. Left to their own devices, financial systems create as much credit as the market will bear, then the market shifts, money vanishes and voila, a panic.
The bank must reach some level of capital requirement to make this loan. In other words, if the bank does not have enough reserves, they cannot make this loan.
The bank can use customer deposits as part of their reserves. They can also borrow from another bank (presumably, paying them interest). Lastly, i think central banks also have a reserve borrowing method (but not sure about this).