Bank Analysis School eBook

Internal Use Only

Four Main Purposes of Capital

1. Absorbs losses 2. Promotes public confidence 3. Restricts excessive asset growth 4. Provides protection to the FDIC insurance fund

Internal Use Only

What is Capital?

Assets

Liabilities

Capital

Capital represents: • Shareholders/ownership’s stake in the bank. • Margin to which creditors (including depositors) are covered.