Think of borrowing $5 from a my friend John… yes, the crisp new five dollar bill is the “money in hand” and absolutely is an asset. However, the obligation to repay John $5 at some point in the future is the liability associated with the ‘deposit’. If I in turn lend Sally that same $5, my expectation of getting the $5 back is the asset I now get to replace the $5 bill I gave up.

If I have no more cash to my name, I have now effectively placed John’s likelihood of getting his $5 back based on Sally’s likelihood of paying me back. Unless I have access and permission from Sally to take her lollipop as collateral if she chooses not to repay me.

One way the gov’t tries to protect people is by guaranteeing some deposits. John suddenly doesn’t have to care how careful I am with his $5 if he knows he can run to my daddy and get it back if I didn’t choose to wisely deal with what I borrowed from him.

Another way is by requiring certain amounts of the capital you refer to, or in my example they would require that I keep some cash in my pocket. In order to lend Sally the $5, they want me to make sure I’ve got a couple bucks in my pocket. If I don’t, yes they come in and collect from Sally, or take the promised lollipop if she can’t repay, in order to give John back the $5, or as much as they can get for the lollipop.