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Capital Requirements |
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Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. Capital Requirements In banking regulation, the amount of money a bank must have available to cover withdrawals, closed accounts, and other account-related expenses. While each jurisdiction computes capital requirements differently, Basel II provides a framework many countries follow; it describes capital requirements as a percentage of a bank's risk-weighted assets. Capital requirements are important for bank solvency, and, in difficult times, reduce the pressure for bank runs. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Solvency Capital Requirement is the target point, but a Minimum Capital Requirement is defined as well. The limited differentiation among degrees of risk also creates incentives for banks to "game" the system through regulatory capital arbitrage by selling, securitizing, or otherwise avoiding exposures for which the regulatory capital requirement is higher than the market requires and pursuing those for which the requirement is lower than the market would apply to that asset, say, in the economic enhancement necessary to securitize the asset. BOSTON GROUP ORDERED TO SHUT DOWN: The Los Angeles-based brokerage firm that took Studio City-based Jerry's Famous Deli public, no longer meets its $250,000 minimum net capital requirement set by regulators due to sharp drops in the stock prices of its IPOs. |
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