20-14 An FI may be insolvent in market value terms even if the book value of equity is positive.

Question

Quizplus · Accepted Answer

Market value of equity reflects the current market price of the shares of the FI, which may be different from the book value of equity calculated using accounting standards. If the market value of equity is lower than the book value of equity, it indicates that investors perceive the FI to be less valuable than what the accounting records suggest. In such a scenario, the FI may be insolvent in market value terms, even if the book value of equity is positive.

20-14 an FI May Be Insolvent in Market Value Terms