Definition of full reserve banking
In our current fractional reserve monetary system, there exist two main types of money: “base money”, which works in the way most people would expect money to work and “broad money”, which is comprised of, temporarily existing, “spendable IOUs”. The spendable IOUs come into existence when private banks make loans and then expire back out of existence when those loans are repaid. The total supply of money in our current system is therefore base money + broad money. The word fractional in fractional reserve banking refers to the fact that the amount of base money is only a fraction of the total. In full reserve banking, there is no broad money. The system operates exclusively with base money. So the amount of base money is equal to the full amount of the money supply.