Capital limits how fast each financial institution can grow.

Question

Quizplus · Accepted Answer

Capital limits are regulatory requirements that determine the minimum amount of capital a bank or financial institution must hold as a percentage of its risk-weighted assets. These requirements are designed to ensure that institutions have enough capital to cover potential losses, thus limiting how much they can grow, especially in terms of their lending and investment activities, without raising additional capital.

Capital Limits How Fast Each Financial Institution Can Grow