"The bank must settle the transaction with the vendor’s bank using reserves held at the central bank. If the borrower never repays the loan, then the bank’s reserves will not be replenished, reducing its ability to lend further."
If a borrower never repays a loan, then the bank's capital is reduced (on the other side of the balance sheet from reserves) and the bank has to obtain more capital (by persuading those holding created deposits to swap them for bank bonds or shares) to maintain their risk capital ratios.
Reserves have absolutely nothing to do with settling transactions. They are an optimisation of the actual process - some other entity in the banking system must take the place of the depositor in the source bank if a cross bank payment is to be made.
International transactions via correspondent banking don't use reserves. They use direct bank to bank mirror transactions.
It would be far better if we forgot about reserves altogether [0]. They weren't even a thing in the UK until 2005.
[0]: http://www.bondeconomics.com/2022/09/bank-reserves-demystifi...