The major difference is that banks can be highly leveraged (and cross-leveraged) under capital requirements only. I think this has to be the case or there wouldn't have been a need or reason to reduce fractional reserve requirements; if banks had been holding their capital as currency or deposits in other institutions then the fractional reserve requirements would have been trivially met since the percentages were lower.

As FTX showed, if most of your capital loses its value then you are insolvent. The banking system is just a little more insecure than it was with fractional reserves.

I'm happy to be shown that I'm wrong, since I am not an expert.

I’m not either! Just wanted to point out that the “zero reserves” thing is a bit more complex than purely what US banks are required to keep as cash in the reserve requirements).

Further, from the announcement that lead to this, it seems that the reserve requirement is zero because the mechanisms have changed. The reserve requirements appear to have applied specifically to reserve accounts held centrally at the federal reserve.

To me this looks very much like a ‘scare’ factoid that can be latched onto and shared in order to persuade people that the banking system is way more fragile than it is, and that it’s collapse is either imminent or inevitable.

OMG zero reserves! Dig a bit deeper and that’s partially true and perhaps not all that important, and represents a technical change in operations rather than the massive risk increase it gets portrayed as.