The banking system can create credit primarily because depositors

1. A bank holds deposits it has promised to repay on demand. 2. In practice **not every depositor withdraws at once**. 3. So a bank can safely lend out part of those funds, and the loan reappears as a new deposit. 4. That repetition is what creates credit. Depositors are not barred from withdrawing, which is precisely why a reserve is still required. _Source: syllabus Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.3 MONEY CREATION BY BANKING SYSTEM_