FIN 3403 Chapter Notes - Chapter 10: Federal Deposit Insurance Corporation, Moral Hazard, Arbitrage
11 Apr 2018
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Amount of capital divided by bank"s total assets. <3% triggers increased regulatory restrictions on the bank. Basel accord (basel committee on banking supervision) Deals with 2nd type of capital requirements (other than equity) Requires banks hold as capital at least 8% of their risk-weighted assets. Items that have little default (reserves and government securities issued by oecd) (off balance sheet activities treated in similar way: assigned credit-equivalent percentages that converts them to balance sheet items to which appropriate risk weight applies and min capital requirements for risks in banks" trading accounts) Emphasis on disclosure requirements, with one of its 3 pillars focusing on increasing market discipline by mandating increased disclosure by banking institutions of their credit exposure, amount of reserves, and capital. 5 groups categorize banks on capital (1-5) Examinations of banks (financial supervision to ascertain its financial condition at least once a year) National banks examined by office of the comptroller of the currency.
