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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.
The number of enterprises is small, entry and exit from the market are restricted, product attributes are different, and the demand curve is downward sloping and relatively inelastic. Oligopolies are usually found in industries in which initial capital requirements are high and existing companies have strong foothold in market share. Monopoly:
For example, U.S. Federal Deposit Insurance Corporation Chair Sheila Bair explained in June 2007 the purpose of capital adequacy requirements for banks, such as the accord: There are strong reasons for believing that banks left to their own devices would maintain less capital—not more—than would be prudent.
Institutions were allowed to choose between the initial basic indicator approach, which increases the minimum capital requirement in Basel I approach from 8% to 15% and the standardised approach, which evaluates the business lines as a medium sophistication approaches of the new framework.
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 ...
The Federal Reserve Friday announced it will extend the comment period for proposed higher bank capital requirements in the wake of banks' complaints the requirements would hurt lending.
In many countries this is the only approach regulators approved in the initial phase of Basel II implementation. The Basel II accord proposes to permit banks a choice between two broad methodologies for calculating their capital requirements for credit risk. The other alternative is based on internal ratings.
The total capital charge is calculated as the three-year average of the simple summation of the regulatory capital charges across each of the business lines in each year. In any given year, negative capital charges (resulting from negative gross income) in any business line may offset positive capital charges in other business lines without limit.