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. Allowance For Bad Debt

    A valuation account used to estimate the portion of a bank's ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. Are Your Bank Deposits Insured?
    Savings

    Are Your Bank Deposits Insured?

  3. The Best Way To Borrow
    Retirement

    The Best Way To Borrow

  4. Common Bond-Buying Mistakes
    Options & Futures

    Common Bond-Buying Mistakes

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center