“Robust banking system” is inherently tied to reserve ratios, or having the deposits on hand to cover the loans you’re writing.
A bank that only writes loans and doesn’t have deposits is the opposite of robust. If any bank gets to do this it would be the central bank. Payment facilitation is less of a superpower and can be more safely entrusted to the private sector.
Maybe they are, but modern private banks already do that.
Before a bank concede a credit it's just checking if it's a good business, not if it has enough deposits or enough reserves.
When giving a credit, banks, are, basically, creating money that it's destroyed when the debt is payed.
A posteriori of giving the credit, the bank will search (assuming it have not already enough) the legal reserves requirement for the new created money.
Note, that this is the opposite of what we normal hear. In reality, first come the credit, then the reserves.
The bank that gave the credit, trying to meet its legal obligations of reserves, will try to get reserves loaned from other banks, creating demand for reserves in the inter-bank system. If the Central Bank does nothing, the added demand would increase the interest rate.
Modern Central banks don't try to control the quantity of money in the system, but the interest rate. If the are not enough reserves for the existing demand, in order to keep the interest rate in their target, the central bank will increase the reserves in the system.
So, deposits are not necessary, otherwise, the quantitative easing programs of the last years, would be impossible.
If a bank is constrained by the Basel capital requirements, it can e.g. attempt to issue bonds. If it does so successfully, it can then create new loans corresponding to a multiple of the value of those bonds.
In the event of a run, a bank is considered illiquid, an insolvent bank is one where losses on debts exceed loss provisions and capital.
An entity that only wrote loans, and didn't have deposits would not be a bank - the definition of a bank is implicitly that it is performing fractional reserve banking via double entry book keeping. (Unless it's the World Bank, which is actually a fund, because the US and UK had an argument about who would control the International Monetary Fund (which is actually a bank) when the Bretton Woods agreement was setup.
No banks, including central banks can really be described as robust. They have at best around 1% fault tolerance in terms of the quantity of loans as a percentage of total lending that they can write-off each year.
Yes, that is about to become a huge problem.
https://www.federalreserve.gov/newsevents/pressreleases/mone...
This indicates that the traditional story of how fractional reserve banking causes money growth is wrong.
In reality, even a non-zero reserve ratio doesn't limit money creation if you look at the financial system as a whole, because the created money will simply become deposits elsewhere.
The true limiter of money creation is capital constraints: somebody must give money to the bank and be willing to lose it - only then is the bank allowed to make loans.
The two issue's with non-zero reserve regulation were (historically) the price of gold was implicitly linked to deposit expansion, and in the Bretton Woods era, all the countries had different expansion rates. Then post Bretton Woods, Basel comes in.
With Basel the Bank's risk weighted capital also regulates the amount of lending, and hence deposit expansion.