USA HISTORY

Detailed explanation-1: -The main benefit of higher equity-to-asset requirements is reducing bank default risk. Increased stability, as already noted, may reflect better risk management and greater allocative efficiency because of the incentive benefits for risk management of maintaining higher equity capital.

Detailed explanation-2: -What are the benefits and costs for a bank when it decides to increase the amount of its bank capital? The benefit is that the bank now has a larger cushion of bank capital and so is less likely to go broke if there are losses on its loans or other assets.

Detailed explanation-3: -Types of financing include a term loan, a business line of credit, or invoice financing, a form of short-term borrowing extended by a lender to its business customers based on unpaid invoices. Business credit cards, which allow you to earn rewards, can also provide access to working capital.

Detailed explanation-4: -Bank capital is the difference between a bank’s assets and its liabilities, and it represents the net worth of the bank or its equity value to investors. The asset portion of a bank’s capital includes cash, government securities, and interest-earning loans (e.g., mortgages, letters of credit, and inter-bank loans).