Bank capital is the buffer on a bank’s balance sheet that allows it to absorb losses, particularly credit losses. Although there is a great deal of excitement about bank liquidity — bank runs, just like in “It’s a Wonderful Life”! — but the main danger is the capital buffer being wiped out (insolvency). A bank run might feature at the end of the bank’s lifetime (quite often, regulators just step in), but the trigger is the insolvency. This article discusses bank capital at a high level, from a macroeconomic viewpoint.
Bond Economics
Primer: Bank Capital
Brian Romanchuk
Wednesday, November 9, 2022
Primer: Bank Capital — Brian Romanchuk
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1 comment:
“The first approach is to issue securities. The second approach — and the preferred method to grow common equity — is to retain earnings. “
I’m afraid B’s going to have add a third and even more preferred approach: receive IOR from the Central Bank….
JPM stock now at $130 was $102 less than 30 days ago..
🤑🧟♂️
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