What the Bank of England says about Money Creation:

What Is Money?

In the words of the Bank of England:

“Economic commentators and academics often pay close attention to the amount of ‘broad money’ circulating in the economy. This can be thought of as the money that consumers have available for transactions, and comprises: currency (banknotes and coin) — an IOU from the central bank, mostly to consumers in the economy; and bank deposits — an IOU from commercial banks to consumers. “Currency [bank notes and coins] only accounts for a very small amount of the money held by people and firms in the economy. The rest consists of deposits with banks. “97% of the money held by the public is in the form of deposits with banks, rather than currency.” (Bank of England – Money in the modern economy: an introduction)

So most of the money in our economy is made up of bank deposits – the numbers that you see when you check your balance. And bank deposits are a IOU – a promise to pay, or in accounting terms, a liability – from the bank to you. But it would be wrong to think of these deposits as simply a representation of the cash that the bank owes you; in fact, these deposits function as money: