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Capital Requirements
The amount of capital needed to enter an industry and compete effectively.
Implications
The minimum amount of capital that a company or financial institution must hold to meet regulatory standards or to ensure financial stability and solvency, particularly important in banking and insurance.
Example
Example: A bank increases its capital requirements to comply with new regulations designed to prevent financial crises by ensuring it has enough capital to cover potential losses.
Related Terms
Different from liquidity requirements, which focus on the availability of cash or liquid assets, capital requirements are about maintaining a solid financial foundation.
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