Is the equity lending involved in naked short-selling structurally equivalent to fractional-reserve banking?
There’s no inconsistency between allowing fractional reserve banking and banning naked short selling. Banks generally lend out money that they borrow (setting aside capital lent), and if one lends out a stock that one has borrowed, that’s not a naked short position, it’s just a plain short. What’s illegal about “naked” shorting (in the U.S.) is selling a stock that one hasn’t either borrowed or determined that one can borrow within the delivery timeframe (currently two days for equities).
The restrictions around money are actually in quite a bit tighter— if a bank were to enter into a transaction that required that it deliver funds and it failed to do so because it couldn’t borrow enough money, it would not be acceptable for the bank to say “oops we thought we could borrow the money sorry” and just pay a small fee (as with equities, where one pays a fails charge). It would instead be an event of default(1), which is more or less the end for a bank.
(1) “Generally, a bank is closed when it is unable to meet its obligations to depositors and others.”