Summary:
Bank capital is the difference between a bank's assets and its liabilities, and it represents the net worth of the bank or its equity value to investors.
Bank Capital:
Bank capital is the difference between a bank's assets and its liabilities, and it represents the net worth of the bank or its equity value to investors. The asset portion of a bank's capital includes cash, government Securities, and interest-earning loans (e.g., 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. A bank's capital can be thought of as the margin to which creditors are covered if the bank would liquidate its assets.
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