Wednesday, October 17, 2018

How much equity should a bank have?


Banks make money by borrowing from depositors, e.g., at 1%, and lending to businesses, e.g., at 4%.  In this case, they would make 3% on the total amount of loans they made.

The above chart shows the increasing levels of equity that a bank is required by regulators carry to as a percentage of Asssets (loans) that it makes.  For example, if a bank makes $100M in loans, it must carry at least $10.5M in equity plus "capital buffers" (last line) to guard against its loans going bad.  With 10.5% buffer, if 10.5% of its loans default, the bank will still have enough to pay back depositors.

You can see why banks want to keep this number low, as it allows them to make more loans, and earn more money.

FASB, the accounting regulators are also trying to make banks realize losses as soon as they know about them, a provision that would reduce their ability to lend as loans default:

The rule, which the FASB issued in 2016, represents a fundamental shift in how banks treat loan losses. Currently, they don’t record losses until they have evidence the losses will actually occur. Supporters of the change say that approach led banks to record losses too slowly after the 2008 financial crisis, leaving investors in the dark. 
The new, upfront method—known as “CECL,” short for “current expected credit losses” and pronounced “Cecil”—is intended to make banks more transparent. But the new method also could require some banks to significantly boost their loan-loss reserves, which could cut into their earnings and regulatory capital.

Some banks say the rule will make them less able to make loans, which in a recession could make bad economic conditions worse. That’s because a bad economy would further boost projections for future loan losses, they say, causing the banks to further increase reserves and leaving them with less capital to lend.

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  22. I'm hacker and Services provider
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    ReplyDelete
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  25. I know a professional hacker globalhackingcompany@gmail.Com who has worked for me once this month. He offers legit services such as clearing of bad records online without being traced back to you, He clone phones, hack Facebook account,blank atm card, instagram, WhatsApp, emails, Twitter, bank accounts, Skype, FIXES CREDIT REPORTs, track calls. He also help retrieve accounts that have been taking by hackers. His charges are affordable, reliable and 100% safe. Contact him via address below...
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  27. Are you an individual businessman or a business organisation that wishes to expand in business ??, we offer financial instrument such as BGs, SBLCs,MTNs, LCs, CDs and others on lease and sales at a rate of 4%+2% of the face value and reasonable conditionfrom a genuine provider. You are at liberty to engage our leased facilities into trade programs as well as in signatory project(s) such as Aviation, Agriculture, Petroleum, Telecommunication and any other project(s) etc.

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    ReplyDelete
  28. We are major/Direct providers of Fresh Cut BG, SBLC, POF, MTN, Bonds and CDs and this financial instruments are specifically for lease and sale.We are one of the leading Financial instrument providers with offices all over Europe.
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    ReplyDelete
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  30. I was searching for loan to sort out my bills& debts, then i saw comments about Blank ATM Credit Card that can be hacked to withdraw money from any ATM machines around you . I doubted thus but decided to give it a try by contacting {Blankatmoffice@gmail. com} they responded with their guidelines on how the card works. I was assured that the card can withdraw $5,000 instant per day & was credited with$50,000,000.00 so i requested for one & paid the delivery fee to obtain the card, after 24 hours later, i was shock to see the UPS agent in my resident with a parcel{card} i signed and went back inside and confirmed the card work's after the agent left. This is no doubts because i have the card & has made used of the card. This hackers are USA based hackers set out to help people with financial freedom!! Contact these email if you wants to get rich with this Via: Blankatmoffice@gmail. com or WhatsApp Via +1 (504) 500-0537..

    ReplyDelete
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  32. Did you know with DAVID BENJAMIN BLANK ATM COMPANY you could be all that you ever want to be and more. Solve all your financial challenges and live above bills with our premium loaded card of over $200,000.00. Kindly contact : davidbenjaminltd@outlook.com and get your card in less than 3 days. We are tested and trusted and transparency is our watchword.

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  33. BUPA FINANCE PLC is a group of company with funding experts and mandate to a finance and investment Company who is a premier provider of trade finance and project finance instruments as well as discountable bank instruments.

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    ReplyDelete


  34. I got my already programmed and blanked ATM card to withdraw the maximum of $1,000 daily for a maximum of 20 days. I am so happy about this because i got mine last week and I have used it to get $20,000. Mike Fisher Hackers is giving out the card just to help the poor and needy though it is illegal but it is something nice and he is not like other scam pretending to have the blank ATM cards. And no one gets caught when using the card. get yours from Mike Fisher Hackers today! Just send an email to blankatm002@gmail.com

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  85. We are project funder with our cutting edge and group capital fund we can finance your signatory projects and help you to

    enhance your business plans,this offer is open to both individuals and corporate bodies.

    Our financial instrument can be used for purchase of goods from any manufacturer irrespective of location. We specialized

    in BG, SBLC, MTN, CD,LC,Bank Bonds,Non collateral loan, confirmable Bank Draft and other financial assistance from AAA

    rated bank (Prime Bank). The financial instrument can be invested into High Yield Trading Program or Private Placement

    Programme (PPP). We work directly with issuing bank lease providers,this Instrument can be monetized on your behalf for

    100% funding.Please see our instrument description as follow.

    DESCRIPTION OF INSTRUMENT:
    (1) Instrument: Bank Guarantee {BG} /StandBy Letter of Credit.{SBLC} (Appendix A).
    (2) Total Face Value: Eur/USD 1M{Minimum} to Eur/USD 100MNJH{Maximum}.
    (3) Issuing Bank: AAA Rated Bank (Prime Bank).
    (4) Age: One Year and One Day.
    (5) Leasing Price: 4% of Face Value plus 2% commission.
    (6) Delivery: bank to bank SWIFT MT-799 and/or MT-760.
    (7) Payment: MT103 (TT/WT).
    (8) Hard Copy: Bonded Courier Service.

    Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we

    will work together for the benefits of all parties involved,If in need of our services, contact me for detail

    For further inquiry contact:

    Email: inquiry.trustedfinanceplc@gmail.com

    Skype : inquiry.trustedfinance@gmail.com

    Whatsapp : +17329300338

    ReplyDelete
  86. Are you an individual businessman or a business organisation that wishes to expand in business ??, we offer financial instrument such as BGs, SBLCs,MTNs, LCs, CDs and others on lease and sales at a rate of 4%+2% of the face value and reasonable conditionfrom a genuine provider. You are at liberty to engage our leased facilities into trade programs as well as in signatory project(s) such as Aviation, Agriculture, Petroleum, Telecommunication and any other project(s) etc.

    Contact : Mr. Richard Chadwich
    Contact Email: ribellodasilver01.finance@gmail.com


    With our financial/bank instrument you can establish line of credit with your bank and/or secure loan for your projects in which our bank instrument will serve collateral in your bank to fund your project.

    We deliver with time and precision as set forth in the agreement. Our terms and Conditions are reasonable and we work directly with issuing bank lease providers, this instrument can be monetized on your behalf for upto 100% funding. Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved.

    All relevant business information will be provided upon request.

    BROKERS ARE WELCOME & 100% PROTECTED!!!

    If Interested kindly contact me via

    Email:~ ribellodasilver01.finance@gmail.com

    serious enquiry only.

    ReplyDelete
  87. We have direct access to genuine providers of Bank Guarantee (BG), Standby Letter of Credit (SBLC), Loan. Issuance is by AA rated Bank in Europe, Middle East, Asia and USA.
    We also monetize same BG/SBLC for 100% cash if you do not have a monetizer.

    Our bank instruments can be engaged in PPP Trading, Discounting Signature Projects like Construction, Oil and gas, Telecommunication etc.

    Please contact me for full details:
    Name: Garvan Mairead

    Email: inquiry.trustedfinanceplc@gmail.com

    Skype : inquiry.trustedfinance@gmail.com

    Whatsapp : +16135085843

    ReplyDelete
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