Re: Slight snag.
No they don't. A lot of people don't understand fractional reserve, and make this mistake.
To make the numbers easy, lets assume the fractional reserve percentage is 10%. In reality it is more like 6%. Lets also assume for simplicity that I am the only person that deposits money in the bank, there is only one borrower, and that borrower uses all the money to buy stuff from me.
I deposit £1000 in a bank. The bank retains £100 of that as a reserve and lends out £900.
The borrower comes into the bank for the £900 loan. The debit is the £900 loan. The credit is the £900 of my cash that is handed to the borrower over the counter.
The borrower then buys some stuff from me for £900. I deposit that £900 in my bank account. My account now has a balance of £1900. The bank retains £90 of that as a reserve, total reserve £190. They lend out £810.
Repeat this process many times over. I now have £10,000 in my bank account. The bank has £1000 in reserve, all of my original cash. The borrower owes the bank £9000.
Lets now add a small complication and assume the borrower doesn't withdraw the money as cash. Instead he opens an account with the bank and has the borrowed money transferred into it.
For the initial £900 loan, the debit is still the loan. Now the credit is to put the money into the borrower's bank account, instead of handing over the cash. The borrower pays for my stuff by bank transfer so the credit is transferred from the borrower's bank account to mine. The end result is the same as for a cash transaction.