Final answer:
Singleton Bank transitioned from holding all $10 million in deposits to having $1 million in reserves and providing a $9 million loan to Hank's Auto Supply, showing a shift to more traditional banking operations.
Step-by-step explanation:
Starting with a hypothetical financial institution, Singleton Bank, which has $10 million in deposits, we see a traditional banking model. Initially, Singleton Bank is not able to earn interest on loans or pay interest to depositors as all the money is stored in the bank's vaults. According to the provided scenario, there is a change in the bank's business plan that affects its balance sheet. Singleton Bank now holds $1 million in reserves and has issued a $9 million loan to Hank's Auto Supply. This indicates a shift towards typical banking operations where banks earn interest from loans and maintain a portion of deposits as reserves.
This change signifies a shift from a full reserve banking model to a partial reserve banking system, more in line with how modern banks operate. Such a move would enable Singleton Bank to generate income from the interest on the loan to Hank's Auto Supply, and it suggests the bank is becoming more active in the financial market. This could potentially offer more services to depositors, like paying interest on their deposits, assuming that the bank earns enough from its lending activities to cover this and other expenses.