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A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets.
Minimum capital is a concept used in corporate law and banking regulation to stipulate what assets the organisation must hold as a minimum requirement. The purpose of minimum capital in corporate law is to ensure that in the event of insolvency or financial instability, the corporation has a sufficient equity base to satisfy the claims of creditors.
The nature of the undertaking- the nature of the business, certainly plays a role in determining fixed capital requirements. A florist, for example, needs less fixed capital than a vehicle-assembly factory. The size of the undertaking- a general rule that states: the bigger the business, the higher the need for fixed capital.
The Federal Reserve unveiled that it's planning to scale back a proposal to raise capital requirements for banks after politicians and the banking industry pushed back on the initial plan, warning ...
Arguably the most important requirement in bank regulation that supervisors must enforce is maintaining capital requirements. [4] As banking regulation focusing on key factors in the financial markets, it forms one of the three components of financial law, the other two being case law and self-regulating market practices. [5]
Published in 2004, Basel II was a new capital framework to supersede the Basel I framework. It introduced "three pillars": [1] Minimum capital requirements, which sought to develop and expand the standardised rules set out in the 1988 Accord; Supervisory review of an institution's capital adequacy and internal assessment process;
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