100 percent capital reserves.

People are beginning to wonder what the alternatives are to having savings in the bank. The average person now understands that banks use our savings for a multiple of financial endevours and only keep a capital to loans ratio of about 10% at best.

One journalist in the weekend papers said that she did not want to deposit any funds in her bank account, not because she was concerned about losing some of her savings if the bank went under, but because she did not want to give her bank access to her savings to use as leverage in the financial system.

Zopa, the social lending site, has seen a doubling in borrowing/lending activity in the last year. I suspect that savers are now seeing Zopa as a much more attractive place to invest a proportion of their savings. They know exactly where their money is going, and can choose the level of risk.

Bank customers are only going to demand more transparency in what their capital is being used for, and if their not happy with this they will simply withdraw their funds.

Perhaps customers will demand much higher capital reserve requirements before the regulators do - it certainly looks that way.; In fact I suspect that a lot of people would prefer their banks not to do anything with their money and maintain 100% reserve ratios. They, themselves, will decide when and where to invest in anything other than overnight deposits.

Fractional reserve banking has had a long and eventful history, but I think there are a few economists from the Austrian school of economic thinking that have a few words to say about the current banking situation.