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

Business

1 answer:

Nina [5.8K]3 years ago

5 0

Answer:

1st and 2nd options are correct.

Its intended goal is to protect the interests of those who hold equity in the bank.
The amount of capital required depends on the type of assets the bank holds.

Explanation:

Capital requirement for a financial institution, such as a bank is the amount of capital they need to pay off their liabilities. Every bank has a reserve ratio which is a small part of total deposits that is enforced upon banks to fulfill all the liabilities. The intended goal of capital is to protect and preserve the interest of depositors and equity holders. Similarly, the reserve ratio of bank substantially depends upon the type of assets bank holds, for liquid assets, the capital requirement is more as compared to liquid assets. Since more liquid asset means that a bank can convert them into cash instantly which is why the capital requirement is less for liquid assets.

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