Cross shareholdings

A Primer on Bank Capital

When a financial system is hit by unforeseen, adverse events, bank capital is the first line of defense. Capital, or net worth, is the owners’ stake in the bank. Profits and losses from a bank’s activities alter its net worth, guiding investment and risk-taking. If losses wipe out its capital, the bank becomes insolvent – its assets are inadequate to cover its fixed liabilities – and typically fails...

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