Reserve requirements are pretty silly. Many countries never had them.
What you want to keep banks afloat are capital buffers, not reserves.
Expressed differently: reserves are like cash in a vault (or electronic equivalents). What you want instead is a big buffer of equity in the capital structure, so that shareholders can absorb huge losses long before creditors do.
In regulatory terms something like this is called 'minimum capital adequacy ratio'. But it's generally better to set up the rules of the game so that banks naturally want to have more of an equity cushion, instead of giving them strict rules on capital buffers but leave lots of incentives to work around those rules.
As an example of incentives: many tax codes around the world let you pay interest with pre-tax money but dividends have to be paid with post-tax money. (That's simplified, since there's lots of different taxes.)
What you want to keep banks afloat are capital buffers, not reserves.
Expressed differently: reserves are like cash in a vault (or electronic equivalents). What you want instead is a big buffer of equity in the capital structure, so that shareholders can absorb huge losses long before creditors do.
In regulatory terms something like this is called 'minimum capital adequacy ratio'. But it's generally better to set up the rules of the game so that banks naturally want to have more of an equity cushion, instead of giving them strict rules on capital buffers but leave lots of incentives to work around those rules.
As an example of incentives: many tax codes around the world let you pay interest with pre-tax money but dividends have to be paid with post-tax money. (That's simplified, since there's lots of different taxes.)