With all the Ukraine stuff, Missing Malaysia Airlines flight MH370, World’s biggest democracy getting ready for the exaggerate Melodrama and some procrastination from my side , some things got lost in my spindle. Time to catch up 🙂
In the banking sector, which features leveraged institutions operating in a principal capacity, capital requirements are designed with the goal of enhancing safety and soundness, both for individual banks and for the banking system as a whole. Bank capital requirements serve as an important cushion against unexpected losses.
They incentivize banks to operate in a prudent manner by placing the bank owners’ equity at risk in the event of a failure. They serve; in short, to reduce risk and protect against failure and they reduce the potential that taxpayers will be required to backstop the bank in a time of stress.