There is the department that issues loans. Their job is to identify credit worthy borrowers and issue loans to them.
Then there is the department that handles compliance. Their job is to make sure the bank complies with the various regulations imposed by the government, such as Basel III and capital requirements and the like.
They are separate operations though. The people issuing loans don't call up the people complying with regulations and check whether or not there are enough reserves there to issue loans today, they just issue as many loans as they possibly can because that's how they make money.
Banks borrow from each other to satisfy their liqudity and other requirements, and the central bank is generally a lender of last resort, so banks can always satisfy their short term flow of funds requirements by borrowing money. The reason banks want to attract depositors is that it's CHEAPER than borrowing the money, and without any deposits they may not actually be profitable.
So the more deposits a bank can attract, the more profitable their lending operations are, but their lending operations are not constrained by their reserves per se.
There is the department that issues loans. Their job is to identify credit worthy borrowers and issue loans to them.
Then there is the department that handles compliance. Their job is to make sure the bank complies with the various regulations imposed by the government, such as Basel III and capital requirements and the like.
They are separate operations though. The people issuing loans don't call up the people complying with regulations and check whether or not there are enough reserves there to issue loans today, they just issue as many loans as they possibly can because that's how they make money.
Banks borrow from each other to satisfy their liqudity and other requirements, and the central bank is generally a lender of last resort, so banks can always satisfy their short term flow of funds requirements by borrowing money. The reason banks want to attract depositors is that it's CHEAPER than borrowing the money, and without any deposits they may not actually be profitable.
So the more deposits a bank can attract, the more profitable their lending operations are, but their lending operations are not constrained by their reserves per se.