Capital Adequacy Quotes

Although the Fed has subjected banks’ portfolios to stress tests to measure the effect of rising interest rates and investment losses, the results might not have shown the whole picture: U.S. banks, particularly small and medium-sized ones, may not have enough capital to maintain solvency and liquidity should their risky loans and investments fail in large numbers. The same is true of the stress tests that the ECB has performed in Europe,

Equity is the cushion that protects financial institutions from unexpected changes in the value of their assets. The greater the leverage, the smaller the losses required to wipe out a company's equity, leaving it without enough money to repay the people who hold its debt.

It's hard to tell which assets will be toxic. The best way to ensure that only shareholders and banks feel it is have adequate capital.

You want banks to take some risk, but intelligent risk.

It's extremely important for our banks to have more capital, higher quality capital.

The quicker you resolve the problems with banks and there's transparency in that process, the faster they recapitalize and are able to make investments.

The financial crisis revealed important weaknesses in many areas of our financial system.

The RBI is interacting with the banks every day.

Divestment measures would improve overall banking sector health.

We have put in place policies through supervision and regulation that has greatly enhanced the safety and soundness of the banking system.

The basic theory of bank regulation is that, left to their own devices, bankers would make banks too risky, so regulators and supervisors are there to make banks more boring. A bank is, roughly, a big pot of assets bought with depositors’ money; the bank owns essentially an option on those assets. If the assets go up, the bank gets a highly leveraged return; if the assets go down, the losses are largely the depositors’ (or the taxpayers’) problem. “Heads I win, tails you lose” … So banks have incentives to buy high-risk, high-return assets with as much leverage as possible, and risk-based capital regulation and prudential bank supervision counteract those incentives. The bankers — who own stock in their banks and get paid bonuses for making money — push for more risk and more volatility, and the bank supervisors push back.

As many have pointed out, it is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks.

Loss-absorbing capacity among banks is substantially higher as a result of both regulatory requirements and stress testing exercises.

The Bankers' New Clothes makes a simple, powerful argument: that banks need to raise more capital. It is entirely persuasive that the extent of their leverage makes the financial system fragile, and it clearly and patiently demolishes all the counter-arguments made by the banks and their lobbyists.

I've been telling anyone willing to listen that banks have a tendency to sit on time bombs while convincing themselves that they are conservative and nonvolatile.

Among other objectives, liquidity guidelines must take into account the risks that inadequate liquidity planning by major financial firms pose for the broader financial system, and they must ensure that these firms do not become excessively reliant on liquidity support from the central bank.

Bank failures are caused by depositors who don't deposit enough money to cover losses due to mismanagement.

Maturity transformation is a central part of the economic function of banks and many other types of financial intermediaries.

Indeed, better risk management may be the only truly necessary element of success in banking.

The failure of one regional bank, assuming it is following a traditional model, will not threaten the entire system.

Nobody is going to invest in the Italian banks unless they trust their balance sheets.

The GSEs are adequately capitalized. They are in no danger of failing.

There isn't a bank in the world that could withstand a run. They all borrow short and lend long, regardless of what they say.

I believe Indian banks have a strong funding profile with largely deposit-funded balance sheets, a large physical presence to cater to the needs of customers, and ability to provide comprehensive solutions to customers.

Among the largest banks, the capital ratios remain good and I don’t expect any serious problems . . . . among the large, internationally active banks that make up a very substantial part of our banking system.