For a bank to count funds as regulatory capital:
A) There has to be an ultra long term maturity date
B) The risk taken by the bank must be taken or shared by provider of the capital
C) The funds must be in the form of pure equity
D) The funds must be re-invested only in cash

Question

Quizplus · Accepted Answer

According to regulatory guidelines, for a bank to count funds as regulatory capital, the risk taken by the bank must be taken or shared by the provider of the capital. This means that the provider of capital should have a stake in the bank's performance and should bear the risk if the bank fails. The funds do not necessarily have to be in the form of pure equity, and there is no requirement for them to have an ultra long term maturity date. They can be re-invested in other forms such as loans or securities.

For a Bank to Count Funds as Regulatory Capital