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capital requirement

definition

The prerequisite amount of funds that depository institutions and banks must have on hand to meet liquidity levels on certain assets required by regulatory agencies such as the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board and the Bank for International Settlements. According to the FDIC, an adequately funded institution must have a Tier 1 capital-to-risk weighted asset ratio of a minimum of 4 percent. also called regulatory capital.

Related Terms

 • Tier One