Bank Capital


DEFINITION of 'Bank Capital'

The difference between the value of a bank's assets and its liabilities. The bank capital represents the net worth of the bank or its value to investors. The asset portion of a bank's capital includes cash, government securities and interest-earning loans like mortgages, letters of credit and inter-bank loans. The liabilities section of a bank's capital includes loan-loss reserves and any debt it owes.

BREAKING DOWN 'Bank Capital'

A bank's capital can be thought of as the margin to which creditors are covered if a bank liquidates its assets. Loan-loss reserves or loan-loss provisions, are amounts set aside by banks to allow for any loss in the value of the loans they have offered.

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