Bank regulators set minimum capital standards to

Question

Quizplus · Accepted Answer

The minimum capital standards set by bank regulators aim to protect the creditors of the bank from decreases in asset values. This is achieved by requiring banks to hold a minimum level of capital relative to their risk-weighted assets. This ensures that they have a buffer against unexpected losses or economic downturns, which in turn protects their creditors. It is not aimed at inhibiting rapid growth, protecting shareholders, or forcing banks to follow socially desirable policies.

Bank Regulators Set Minimum Capital Standards to