a. When financial regulators require that an investment bank should have 10% capital requirement, what does...
a. When financial regulators require that an investment bank
should have 10% capital requirement, what does this mean in terms
of the investment bank’s balance sheet?
b. What would the purpose of such a requirement be?
Homework Answers
1) In terms of investment banks balance sheet the capital requirement is the amount of the capital that the bank should hold as suggested by its financial regulator. It comes under liabilities and equity side under balance sheet as the owners equity or capital.
2) Banks runs on the business of trust . So the aim is protect the firm from any foreseeable problems that may occur in future. Capital requirement protects the bank themselves, government, economy and it's customers.
So financial regulator framed the rules that banks hold enough capital to ensure its continuation safe and also for an efficient economy.
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a. When financial regulators require that an investment bank
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