Bank capital requirements, explained

Banks reforms focus on a number of areas, including so-called capital adequacy, or capital requirements. This means the amount of money that a bank is required to hold on its books. Here's why those reserves are called a cushion, and how that cushion works.

[@jerzygrzegorowski1265]

my right ear enjoyed this video

[@deckerraul2946]

Dunno if you guys cares but if you're bored like me atm then you can watch all of the latest series on InstaFlixxer. I've been watching with my girlfriend for the last weeks :)

[@jaxtynzachary5825]

@Decker Raul Definitely, I've been watching on InstaFlixxer for years myself :D

[@anishkamishra9129]

loved your way of explaining it! thanks, it helped!

[@tehfourth]

you explained this so clearly! great video

[@mehriban9003]

oh my gosh! such a great explanation!

[@KhalidKhan-oy2sx]

excellent explanation and good throw at the end.

[@fahriersandi]

Graet video! Keep going sir!

[@alexvech]

great videos mate, keep going !

[@turtlerabbit3211]

Best explanation ... about airbags

[@pakiiez]

You sir, are, legen . wait for it .. dary - Legendary

[@akhil123456000]

Wow, great explanation

[@sudhanshusingh9510]

Brilliant And a lot of thanks

[@bocslauris]

WHere's the audio ?

[@sammy29march]

nice....appreciable

[@dhruvkulkarni729]

this was so good

[@ArianOby]

love the analogy.... but any banker in here would have been a lot happier with introducing the Basel calculations and how local regulations impact the requirement for the "air bag". I was expecting a bit more from the video :-( Liquidity and Capital are inevitably tied... last I checked. A run on banks can lead to insolvency if its illiquid; CAR now requires the airbags to be in place as a buffer to liquidity...... ye or neigh people?

[@edwawriw4367]

Sounds like he is talking about Reserve Requirement which ain't the same as CAR Bank Capital ain't cash in vault it is equity on the liability side of the T. I drive a truck too

[@lalifrank896]

Very good

[@haroon4330]

my textbook says too much bank capital is not good as it lessens roe, can someone explain why

[@edwawriw4367]

Means you ain't using all you are allowed to use by law to make new deals

[@alphascythian9236]

It’s the mic drop at the end for me

[@thunderbirdizations]

0:01 I like this this video 0:54 and then it got dark, real fast 😂

[@ivanverdian1]

God.. I just understand what the CAR is used for..

[@zes3813]

would not be unhappy, those things dn't matter

[@nghan1504]

This vedio explain liquidity instead of Capital. Haiyaaaa

[@stevenhail2837]

This is complete nonsense, I am afraid. Capital does not mean money. You are confusing liquidity requirements with capital adequacy requirements. It has absolutely nothing whatsoever to do with 'cash in bank vaults'. Please, if you are a student, disregard this video, and go elsewhere to learn about the distinction between liquidity requirements and capital adequacy requirements. the presenter confuses the two.

[@mrzack888]

do you recommend any video or materal that teaches heterodox endogenous explanation of capital?

[@altereg0]

type bitcoin into the search bar

[@altereg0]

I don't know who the audience is for this but it can't be bankers, or anyone learning finance. Because IT IS WRONG. Don't get Capital (the net figure of assets and liabilities) confused with Liquidity (cash available for customers to take out at any given moment).

[@edwawriw4367]

That is exactly right. Bank capital or equity is on the liability side of the T....totally diff from Res Req

[@Reizermo]

I got to 39 seconds, enough to identify this as tripe

[@Reizermo]

ok so maybe i was too quick to judge. so I turned it on again. my instinct was right. no use dumbing it down to a nonsense analogy then to throw in so many buzzwords, while also presenting in a frenetic manner.

[@mrzack888]

this is a bad vide. You talking about investment banks or depository institutes? Coz depository institutes DO not loan out customer's deposits to borrowers. They only loan reserves to other banks for a short term over night. Whereas investment banks need to hold actual capital of investors.

[@gargamelandrudmila8078]

I think u are getting confused with a banks reserve requirement. Deposits are never lent out they ALL WAYS sit in the banks reserve acc with the central bank -inless there is a run on the bank. Most people never withdraw a the cash they deppsit in any given month to make payments. Instead they just cask the bank to make a payment. Unfortunately for society banks are very happy this happens. This is called the payment system. There are two levels. 1- reserves at central bank that is the basis for end of day payment settlement since bank understand that this is the closest thing to money in the Fiat system and do not trust the credit worthiness of other banks by holding private bank credit for more than 1day. 2-private bank credit. This is issued in exchange for clients deposits of physical cash or bank reserves settled between the clients bank and another client at the same or different bank. No most bank to bank payments are first done via step 2 and this level is known as the interbank payment system. Each day banks net out their level 2 payments between each other. Example Bank A pays 1000 units of its private bank credit to bank B. Bank B pays 250 units of its own bank credit to bank A on behalf of its client. From the clients perspective they can not distinguish between physical cash and bank credit since both are denominated in the same currency. Anyways bank A and B net the payment so the gross reservers are never transfered or blocked in favour of another bank. Only the net amount in private credit is paid and settled using reserves. So net-net bank A only owes bank B 750units to be settled in reservers. Thus instead of 1000units bank A has to use to settle payments it now only needs 750. This is how banks have abused the interbank payment system. The private bank credit can be used for loans with bank reserves as collateral. The bank can typically make loans on a basis of 10x of its server base. This gives the classical name for reserve ratio of 10%. This means Bank A could lend to its client 1000units of private banks credit and still keep 100 units in reserves to facilitate payments. This ratio changes with time and must not get bellow 10% and thus bank borrow short term to enable meet its 10% minimum level.

[@aiothedat3102]

So banks aren't really restricted by that

[@bwm999]

completely wrong. Please do not use this as an explanation of capital. It is not cash!