Risk-Based Capital Requirement
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Definition of 'Risk-Based Capital Requirement'
A stated requirement of liquid reserves placed upon banks and institutions that deal in risky ventures.
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Investopedia explains 'Risk-Based Capital Requirement'
These requirements exist for the protection of investors who hold an interest in these types of businesses. Governing bodies place reserve requirements upon these institutions based on the premise that stakeholders will still receive limited payment should insolvency occur.
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