it's the capital requirements or capital to risk weighted assets ratio that restrict lending, not reserve requirements. reserve requirements are to protect runs

it's the capital requirements or capital to risk weighted assets ratio that restrict lending, not reserve requirements. reserve requirements are to protect runs by depositors and capital requirements are to protect the bank against bad loans. at the end of every month and especially every quarter the bank submits its capital ratio and a bunch of other calculations to the regulators. if the ratio isn't good it has to increase capital reserves. if the ratio is good it can do share buybacks and dividends. https://en.wikipedia.org/wiki/Basel_III https://en.wikipedia.org/wiki/Basel_III