Major central banks like US Fed, European ECB or Bank of Japan don't generate money using fractional reserve banking anymore.
They use open market operations or quantitative easing instead. In other words, they buy debt, like treasuries with money.
A large proportion of money in modern economies is generated (along with private debt) in the private banking system. It is true that central banks can also create money (and in fact can do it without creating debt, unlike private banks), and can use this money for quantitive easing, but it’s not an either or - both are happening.
1 - https://www.federalreserve.gov/monetarypolicy/reservereq.htm
How much a bank can lend is basically entirely determined by the amount of paid-up capital, not reserves anyway. The maximum ratios are fairly strictly regulated (e.g. Basel rules).
I would be more confident in banks if they were required to carry some minimum fraction of their balances in cash in order to guarantee availability of funds.
That said, I'm re-reading the page that I linked a bit more closely and realizing that it doesn't just say "reserve requirements must be satisfied by holding vault cash" , it says "reserve requirements must be satisfied by holding vault cash and, if vault cash is insufficient, by maintaining a balance in an account at a Federal Reserve Bank".
It's not clear to me whether that "balance" at a Fed bank must be in cash, but even if it is, I'm realizing that the requirement I was hoping existed may not have existed even prior to this change.
TL;DR - Requirement for strong, local, cash reserves would be better than weaker requirements is better than no requirements. I'm not sure how close to the good end of that spectrum we've ever been, but where we are now certainly doesn't seem too good.
Note: Please do explain if there is some nuance that I'm missing here
https://fred.stlouisfed.org/series/EXCSRESNS
The reserve requirement served no purpose because banks were holding trillions of dollars in excess of their reserve requirements meaning that the reserve ratio was an ineffective monetary policy tool.
To create money banks need a certain amount of capital this is governed by capital requirements most of which come from the capital invested into the bank through share purchases.
Many countries have no reserve requirements at all, BOE specifically doesn’t even issue them any longer.
Banks do lend out deposits, which is why when they fall below capital reserves as a result, they use the overnight lending facility of the Fed [1] (or similar processes in most countries) to maintain mandatory capital reserves. It leads to data like this [2] which shows the actual amount held by banks versus deposits.
Central banks are passing private banks in their money creation.