A bank decides to increase its lending capabilities beyond what is allowed by its reserve requirements. Which of the following best describes the potential consequences of this action?

When a bank increases its lending beyond what is allowed by its reserve requirements, it can face serious consequences. The reserve requirement is the amount of money a bank must keep on hand and not lend out, ensuring it can meet customer withdrawals and maintain stability. If the bank exceeds this requirement, it risks running out of cash, which could lead to a lack of funds to cover withdrawals and other obligations. For example, if a bank lends out too much money and many customers decide to withdraw their savings at once, the bank might not have enough cash available, leading to financial trouble or even bankruptcy. Overall, while lending more can increase profits in the short term, it can create significant risks for the bank's long-term stability.