I apologize for not seeing this sooner! Yes, the bank is limited - it cannot create money endlessly. The first limit is market discipline. Loans can go bad, so banks can go bankrupt. Therefore bank lending is limited by the number of profitable borrowers in the marketplace. The second limit is regulatory: there are lots of regulatory rules limiting the type, size, and risk-ratings on loans, as well as risk-weighted capital requirements that limit loan formation. Thanks for asking!
Is the bank at least limited in the amount of money it can "create" via a relationship to its deposits?
I apologize for not seeing this sooner! Yes, the bank is limited - it cannot create money endlessly. The first limit is market discipline. Loans can go bad, so banks can go bankrupt. Therefore bank lending is limited by the number of profitable borrowers in the marketplace. The second limit is regulatory: there are lots of regulatory rules limiting the type, size, and risk-ratings on loans, as well as risk-weighted capital requirements that limit loan formation. Thanks for asking!