This doesn&#x27;t make any sense.  When a bank creates a loan of $X and disburses the loan into the borrowers account, two things happen:<p>1) The bank&#x27;s loan assets go up by $X
2) The bank&#x27;s deposits go up by $X<p>Deposits are part of &#x27;net transaction accounts&#x27;[0] so the bank would now need to hold 10% of $X in additional cash (e.g. in their vault).<p>So, it seems like the bank can create a loan of $X with just $0.1X of cash.  Hang on, though.  This assumes that the borrower just keeps the money in his bank account, which is unlikely.  When she withdraws the money to spend it, the bank&#x27;s reserve requirements go down by $0.1X (good) but they also need to pay out $X of cash (bad).  So, it really did cost them $X to make $X of loan.<p>Now, if they have a CDS related to this loan, then they are insulated from the risk of default.  But, how is that relevant to reserve requirements?<p>[0] &quot;Net transaction accounts are total transaction accounts less amounts due from other depository institutions and less cash items in the process of collection.&quot;