This article explains how the majority of money in the modern economy 
is created by commercial banks making loans.
• Money creation in practice differs from some popular misconceptions — 
banks do not act simply as intermediaries, lending out deposits that 
savers place with them, and nor do they ‘multiply up’ central bank money 
to create new loans and deposits.
• The amount of money created in the economy ultimately depends on the 
monetary policy of the central bank. In normal times, this is carried 
out by setting interest rates. The central bank can also affect the 
amount of money directly through purchasing assets or ‘quantitative easing’.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf