Risk capacity

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1. Banking.

The maximum level of risk a financial firm can assume within the constraints of its regulatory capital and liquidity obligations, and its obligations to depositors, other customers, and shareholders.

The risk appetite is then set at a level within the maximum risk capacity, normally lower than the maximum capacity.


2.

In the non-financial sector, the term 'risk capacity' is sometimes used to mean very much the same as risk appetite.


See also