Banks lend money they don't have, they cannot do that with Bitcoin because math. Usually their reserves cover a fraction of the loans they give, and they get a massive multiplier benefit. Fortunately, the blockchain won't accept pieces of paper with IOU written on them.
Money in a 3rd party wallet is an IOU as far as the block chain is concerned. Here is how it works you deposit some bitcoins to Bit Bank and the block chain is updated so they now own the and can lend gem out the same day. The borrower would then be able to deposit his coins into Bit Bank II which could then lend them out. Net result is effectively bitcoins from thin air even though there not part of the block chain people act as though they exist which impacts the supply / demand curve.
The bank would have a database somewhere saying "We owe btbuildem 10 BTC". When you make a withdrawal they would take some out of their massive stock and hand them to you. So long as they have enough to cover withdrawals at any given moment they don't need enough to cover if everyone made a withdrawal at once, any more than they do with dollars/pounds/etc.
