Frequently, as in the United States, a minimum percentage of reserves is fixed by law.[7] A bank's reserves consist, first, of the lawful money which it actually holds in its vaults at any moment and secondly, of certain other credit items in other banks or with the government, of such a nature that a bank is permitted to count them as tho immediately available.
The explanation of the adequacy of a mere fractional reserve is found in the nature of the individual monetary demand[8] and in the effective way in which a checking account serves as a substitute for actual money.[9] Every customer, if he would avoid overdrawing his account, must at most times keep a goodly balance to his credit that he does not immediately need.

Many individuals and corporations must at times keep very large balances.

The times of maximum monetary need of the customers of a bank never exactly coincide and many payments are made among the customers of a single bank, requiring only bookkeeping transfers.

A fractional reserve is therefore ordinarily fully adequate, altho with any less than a 100 per cent reserve any bank would be insolvent if all of its demand obligations were presented at the same instant.

Such a contingency is made impossible by business custom and public opinion especially among the larger customers of banks, but the panic of small depositors often brings about dangerous conditions.
Sec.8.