Full reserve banking (also called 100% reserve banking) means banks must keep every single dollar deposited by customers in their vaults — no lending it out. If you deposit $10,000, the bank holds all $10,000 in reserve.
This is the exact opposite of how modern banks work. Currently, banks practice fractional reserve banking — keeping only 10-20% of deposits in reserve and lending out the rest. Full reserve banking would eliminate the risk of bank runs entirely because your money is always there.
Economists like Irving Fisher and Milton Friedman advocated for full reserve banking. The trade-off? Banks could not lend deposits, so credit would shrink dramatically. Supporters say this creates a more stable system; critics say it would cripple economic growth by severely limiting available credit.