Bank Capital

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Secondary Reserves

    Assets that are invested in safe, marketable, short-term securities ...
  3. National Bank Surveillance System

    A computerized monitoring system developed and implemented in ...
  4. Loan Loss Provision

    An expense set aside as an allowance for bad loans (customer ...
  5. Texas Ratio

    A ratio developed by Gerald Cassidy and other analysts at RDC ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
RELATED FAQS
  1. As an investor in stock, how should I evaluate a company's capital employed?

    Before you evaluate a company's capital employed, you first need to nail down a consistent, working definition of capital ... Read Full Answer >>
  2. Why might two companies calculate capital employed differently?

    The primary reason there are different ways of calculating a company's capital employed is because there are different definitions ... Read Full Answer >>
  3. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  4. What is the justification for allowing deferred tax liabilities?

    A deferred tax liability tracks the temporary difference that arises between a company's income taxes that will be due in ... Read Full Answer >>
  5. How is liquidity risk captured by the cash conversion cycle (CCC)?

    Liquidity risk is captured by the cash conversion cycle (CCC) through the use of days inventory outstanding, days sales outstanding ... Read Full Answer >>
  6. Can a business ever be too small to issue commercial paper?

    There are effective – though not legal – restrictions on the size of commercial paper issuers. Any company can issue commercial ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  2. Savings

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  3. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  4. Options & Futures

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  5. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?
  6. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  7. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  8. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  9. Fundamental Analysis

    How Microsoft & Apple's Balance Sheets Compare

    Looking at two iconic companies, Microsoft and Apple, whose balance is sheet is stronger and where?
  10. Economics

    What is an Impaired Asset?

    An impaired asset is one where the fair market value of the asset is less than the historical cost (or book value) of the asset.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center