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Capital ratio
A commercial bank's capital ratio measures the funds it has in reserve against the riskier assets it holds that could be vulnerable in the event of a crisis.
The European Union runs regular “stress tests” to check whether banks have enough of a capital buffer to weather difficult economic/financial conditions (known as disaster scenarios). Banks must maintain sufficient capital which includes money raised from selling new shares to investors and also their retained earnings (profits).
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What is a bank stress test?
Study Notes
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Commercial Bank Stress Tests
Topic Videos
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Stress Tests for Banks (Financial Economics)
Study Notes
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Limits on Commercial Bank Lending
Topic Videos