As a consequence, reputation and trust in the ability of individual banks and the banking system as a whole to redeem the bills, the IOUs or the deposits is essential in order for the new fractional reserve system to function. Trust is the critical word. It becomes an intimate attribute of money.
5  Cavalcanti and Wallace justify the emergence of banks in a random-matching model of monetary exchange as those agents which whose trading histories are public information (see Cavalcanti, R.O. and N. Wallace (1999), “A Model of Private Bank-Note Issue”, Review of Economic Dynamics, 2(1), pp.