Capital Requirements
The regulatory floors on how much equity capital a bank must hold relative to its risk-weighted assets. The modern framework is Basel III, with floors on Common Equity Tier 1 (CET1, 4.5 percent), total Tier 1 (6 percent), and total capital (8 percent), plus bank-specific buffers and surcharges. Capital requirements -- not reserve requirements -- are the binding constraint on bank lending in the modern US system; a bank low on capital cannot expand its balance sheet without either rebuilding capital from earnings or raising new equity.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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