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What does the Bank of England's 2014 money article say about reserves and deposits?
Research question: What does the full text of the Bank of England's 2014 'Money in the modern economy: an introduction' say about reserves and deposits, and does it match the topical article's account?
The facts indicate that the 2014 Bank of England document says banks decide how much to lend based on profitable opportunities and interest rates, and that reserves are then supplied on demand 27. It states that the aggregate quantity of reserves does not directly constrain lending or deposit creation 35, and that the money multiplier approach is not an accurate description of money creation 6. It also reports that bank deposits make up 97% of broad money in circulation 9. The facts do not include the topical article's account, so no direct match can be tested, and one entry concerns a 2010 Federal Reserve paper rather than the 2014 publication 10. The newest fact is dated 2014 Q1, roughly 12.5 years before October 2026 1.
Checked 2026-10-18. Only documented and supported facts are used.
Dig deeper on this questionSources
[1] documented
The document explains that the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks.
"As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks."Mc Leay Et Al. 2014 Money Creation In The Modern Economy (2014)
[2] documented
Banks decide how much to lend based on profitable opportunities and interest rates, which determines deposit creation, and this in turn influences how much central bank money banks want to hold in reserve.
"Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve... whic"Mc Leay Et Al. 2014 Money Creation In The Modern Economy (2014)
[3] documented
The text asserts that the aggregate quantity of reserves does not directly constrain the amount of bank lending or deposit creation.
"In no way does the aggregate quantity of reserves directly constrain the amount of bank lending or deposit creation."Mc Leay Et Al. 2014 Money Creation In The Modern Economy (2014)
[4] documented
Reserves can only be lent between banks because consumers do not have access to reserve accounts at the Bank of England.
"Reserves can only be lent between banks, since consumers do not have access to reserves accounts at the Bank of England."Mc Leay Et Al. 2014 Money Creation In The Modern Economy (2014)
[5] supported
The Bank of England states that reserves are not a binding constraint on lending and that central banks typically implement monetary policy by setting the price of reserves (interest rates) rather than controlling their quantity.
"In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks."Money Creation In The Modern Economy
[6] supported
The document argues that the 'money multiplier' approach, which assumes a constant ratio of broad money to base money, is not an accurate description of how money is created in reality.
"While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality. Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates."Money Creation In The Modern Economy
[7] documented
Banks determine the amount of central bank money they hold in reserve based on their lending decisions and the resulting deposit levels, which are then supplied on demand by the Bank of England.
"The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England."Money Creation In The Modern Economy
[8] supported
Reserves can only be lent between banks because consumers do not have access to reserve accounts at the Bank of England.
"Reserves can only be lent between banks, since consumers do not have access to reserves accounts at the Bank of England."Money Creation In The Modern Economy
[9] supported
Bank deposits constitute 97% of the broad money currently in circulation in the modern economy.
"Of the two types of broad money, bank deposits make up the vast majority — 97% of the amount currently in circulation."Money Creation In The Modern Economy
[10] supported
The source is a 2010 Federal Reserve paper, not the Bank of England's 2014 publication, so it does not address what that document says about reserves and deposits.
"Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?"Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist? (2010)