Capital conservation: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
(Add definition. Source: Linked pages) |
(Add link.) |
||
| Line 24: | Line 24: | ||
*[[Financial services]] | *[[Financial services]] | ||
*[[Limited liability]] | *[[Limited liability]] | ||
*[[Loss absorbing capacity]] | |||
*[[Profit and Loss reserve]] | *[[Profit and Loss reserve]] | ||
*[[Regulation]] | *[[Regulation]] | ||
Latest revision as of 07:15, 1 February 2024
1. Company law.
The company law principle - also known as capital maintenance - that capital should be conserved for the protection of creditors.
For example, dividends can only legally be paid out of retained profits, not out of capital.
2. Financial services - banks - supervision - regulation - capital adequacy.
A capital adequacy requirement for all banks to build up an additional loss-absorbing capital cushion to improve their resilience to future stresses.
The idea is for banks to build up the loss-absorbing cushions outside periods of stress, to be drawn down if losses are incurred in the future.
