A change in reserve requirements may force depositories to borrow to cover any reserve deficiencies or may make depositories more willing to accelerate the growth of credit. Both of these will affect:

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Changes in reserve requirements directly impact the amount of reserves banks must hold, influencing the mix of required and excess reserves. This, in turn, affects interest rates as banks may need to borrow to meet reserve requirements or may lend more freely, influencing the cost of borrowing. Both the money multiplier and the deposit multiplier are affected because these are determined by the reserve ratio; changes in reserve requirements alter this ratio, thus impacting how much banks can lend out based on their reserves.

A Change in Reserve Requirements May Force Depositories to Borrow