Impaired Capital

AAA

DEFINITION of 'Impaired Capital'

1. When a bank's actual assets are worth less than their stated value. When a bank has impaired capital, this capital can be liquidated if the bank cannot make up the deficiency. State laws define the treatment of a bank with impaired capital.


2. When a company's actual assets are worth less than the stated value of the company's outstanding shares.

INVESTOPEDIA EXPLAINS 'Impaired Capital'

In the case of a bank with impaired capital, one option for making up the deficiency is that the bank's board of directors can choose to levy and collect pro rata assessments on common stock to restore the impaired capital. If stockholders do not pay the assessments within a specified time frame, usually three to four weeks, the bank's board of directors can choose to sell enough of the stockholder's shares to collect the assessment.

RELATED TERMS
  1. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. From Booms To Bailouts: The Banking ...
    Home & Auto

    From Booms To Bailouts: The Banking ...

  3. Are Your Bank Deposits Insured?
    Savings

    Are Your Bank Deposits Insured?

  4. Variable Costs
    Investing

    Variable Costs

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