Question

Which of the following is true of the capital requirement? Check all that apply.

Answer 1

Answer:

The correct answer is B.

Explanation:

Capital requirement, also sometimes called regulatory capital, means the standard requirement required of banks and other institutions where funds are deposited, a requirement that determines the maximum amount of capital required that the entity must maintain as a proportion of a certain level of assets according to the regulations of regulatory agencies such as the Bank for International Settlements, the Federal Deposit Insurance Corporation or the Federal Reserve Council. These capital requirements are imposed to ensure that these institutions do not participate or maintain investments that can increase their risk of bankruptcy and that they have sufficient capital to maintain their operational losses while still being able to take care of new withdrawals.

Answer 2

The intended goal of the capital requirement is to protect the interest of those who hold equity in the bank and also the higher the percentage of assets holds as loans, the higher the capital requirement. Therefore, the correct answer is A and B

Capital requirements refer to the exact amount of capital a bank or other depository institutions must have in line with the requirements of its financial regulator.

Further Explanation

Capital requirements are put in place by the financial regulator to protect the interest of the depositors in case of a market crash, recession or financial crises

Capital requirements are also put in place to make sure that the activities of banks and other financial institutions are dominated by investors.  The capital requirements are also to ensure that banks have the required amount of capital to take care of operating loses while depositors can still be able to withdraw.  

The advantages of capital requirement include:

It ensures depositors have access to their money.

It provides measures to evaluate and financial institution

It ensures that banks and other depository organizations can meet up with their financial obligations.

Some disadvantages of capital requirements include:

• It negatively affects the banks’ ability to invests
• It reduces access to credit and loans.

Some of the regulatory institutions that set capital requirement include

• Bank for international settlement
• Federal Reserve board
• Federal deposit insurance cooperation

LEARN MORE:

• Which of the following is true of the capital requirement? Check all that apply. brainly.com/question/13789384
• Which of the following is true of the capital requirement? Check all that apply. brainly.com/question/13108033

KEYWORDS:

• capital requirements
• percentage of assets
• equity
• loans
• interest