While that's true, isn't the exact same true of any currency (including BTC)? In principle, a bank could loan BTC with a fractional reserve and produce the same outcome, could it not?
I suppose banks could create some sort of financial instrument that says "IOU 2.5 BTC" or whatever, but this thing they create couldn't pass off completely as bitcoins, since you couldn't spend this thing on the blockchain like you can with ordinary bitcoins.