Answer to Question #266670 in Finance for Paige Connor

Question #266670

Why is capital important to banks

1
Expert's answer
2021-11-17T10:03:58-0500

Capital functions as a protection to a bank from all sorts of uninsured and unsecured risks that may ultimately turn into losses. This is where the two principal functions of capital are obtained which are:

  • To absorb losses
  • To build and maintain confidentiality in a bank. Therefore,capital is required to allow a bank to cover any losses using its own funds.

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