Banks are not allowed to hoard capital, and financially speaking, keeping cash in reserve means they're not making money from it.
Indeed, the regulations require the opposite of what you suggest: banks are are required to maintain a certain level of capital reserves to avoid collapse even though they would prefer to spend all of it on investments or making loans.
Indeed, the regulations require the opposite of what you suggest: banks are are required to maintain a certain level of capital reserves to avoid collapse even though they would prefer to spend all of it on investments or making loans.