The banking system can lend the sum of its excess reserves because O Bank assets are greater than bank liabilities. O The money multiplier is less than 1. O Required reserves are a leakage from the banking system. Banks are required to keep only a fraction of deposits on reserve.
AnswerBanks are required to keep only a fraction of deposits on reserve.
(Banks have to keep a certain fraction of their deposits as reserve and any excess can be lent by them.)