> Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so.
But there are important constraints - from the overview in the article you linked to:
"Although commercial banks create money through lending,
they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system. Prudential regulation also acts as a constraint on banks’ activities in order to maintain the resilience of the financial system. "
The main constraint is called Capital Adequacy, and is based on the requirement for a bank to hold some of its own money in reserve compared to the amount of loans it issues. And importantly this money held in reserve must be money that is not pledged to anyone or anything else - i.e. cannot be money from depositors or from issued loans. The banks cannot easily increase this amount of unpledged money (which is called Tier 1 Capital) and hence it acts as a real limit on the amount they can lend.
But there are important constraints - from the overview in the article you linked to:
"Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system. Prudential regulation also acts as a constraint on banks’ activities in order to maintain the resilience of the financial system. "
The main constraint is called Capital Adequacy, and is based on the requirement for a bank to hold some of its own money in reserve compared to the amount of loans it issues. And importantly this money held in reserve must be money that is not pledged to anyone or anything else - i.e. cannot be money from depositors or from issued loans. The banks cannot easily increase this amount of unpledged money (which is called Tier 1 Capital) and hence it acts as a real limit on the amount they can lend.