> Doesn't this eliminate the protections from 2008?
No, it doesn't. Broader capital requirements are still in place. This move just removes reserve requirements for certain categories of transaction accounts.
> this is a defacto reduction in capital requirements no, if reserve requirements are lowered?
Nope, though that's a reasonable assumption.
Reserve requirements regulate the fraction of deposits banks must hold at the central bank. Reserve requirements focus on liquidity.
Capital requirements regulate the fraction of assets banks must hold as equity (or other tiers of risk-absorbing capital). Capital reserves aren't held in a vault, and are more of an accounting fiction than reserves. Capital requirements focus on solvency.
Put another way, if half a bank's mortgages turn out to be shit, its total reserves won't change. It's total capital will.
So reducing reserve requirements could reduce banks' capital, if the freed reserves are dumped into risk assets. Or it could leave them virtually unchanged, if the freed reserves are dumped into safer assets. Systemically, if the freed reserves support a continuation of orderly payment systems, they could increase banks' capital by defending the value of their assets. (Bank balance sheets have a confusing circularity about them.)
I would think it depends on how much you trust your bank to maintain solvency through the downturn. For what its worth I'm staying with who I was banking with in the last downturn, because they were one of several banks that remained solvent and healthy through the downturn. They did this by making conservative financial decisions, which they continue to do, so I'm not worried about them.
No, it doesn't. Broader capital requirements are still in place. This move just removes reserve requirements for certain categories of transaction accounts.