There are checking, savings, money market accounts, FDIC insured and uninsured accounts, margin accounts and a long list of other types of accounts. That's completely irrelevant. The only relevant type of account would be cash accounts, which do not allow the institution to lend out the deposit, forcing them to use "permissible investments", which can also be risky. I know how fractional reserve banking works. You are missing the point. Even without fractional reserve lending, if a bank loans out 100% of the money it has on deposit, and enough borrowers fail to repay such that the amount lended out is less than the original amount of deposits, that bank is now a fractional reserve lender, because it does not have the collateral to cover its loans. Fractional reserve lending is the same dangerous scheme on margin. Banks used to print more gold certificates than gold they had on deposit illegally, fractional reserve lending was the institutionalization of this practice. My point is that even WITHOUT fractional reserve lending, the practice of lending out depositors' money still has the potential to become fractional reserve lending if borrowers do not pay back their loans. The practice of lending out other peoples' money with or without fractional reserve lending is the root cause of the boom/bust cycle and should be outlawed entirely. 99.9% of people do not understand that when they deposit money in a bank, they are actually investing in a loan fund managed by the bank that may or may not be insured.