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Capital Requirements


The amount of capital a bank or other financial institution (a regulated entity) has to hold, at all times, as required by its regulators. It is the sum of tier-1 capital (core capital), tier-2 capital (supplementary capital), and tier-3 capital (ancillary capital). Broadly speaking, the capital requirements of a bank, at a certain time, are the sum of (a) shareholders’ equity, (b) minority interests, and (c) subordinated indebtedness.

It is typically expressed as a capital adequacy ratio of a bank’s equity as a percentage of risk-weighted assets (RWAs).

Capital requirements are also known as capital base, capital adequacy or regulatory capital.



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Banking is an integral part of the modern financial system and plays an important role in an economy. It basically involves the so-called intermediation (e.g., ...
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