How Does the Reserve Ratio Affect Seigniorage Profitability?

In models that have a reserve or a collateral token, a lower reserve ratio (or higher leverage) can potentially increase the profitability of seigniorage because the protocol has more tokens to issue relative to the assets it holds. However, this also drastically increases the risk of a de-peg and failure, as the system has less capacity to absorb volatility or mass redemptions.