➡️ Increased lending: A higher reserve ratio and capital ratio can lead to increased lending by banks. This is because banks have more money to lend out, which can lead to increased economic activity.
➡️ Reduced risk: A higher reserve ratio and capital ratio can also reduce the risk of banks taking on too much debt. This is because banks have more money to cover potential losses, which can help to protect the financial system from instability.
➡️ Increased confidence: A higher reserve ratio and capital ratio can also lead to increased confidence in the banking system. This is because banks have more money to cover potential losses, which can help to reassure customers that their deposits are safe.