This refers to any alteration in the mandated minimum amount of capital that financial institutions must hold to absorb potential losses. Such changes are typically imposed by regulatory authorities to strengthen financial stability and protect depositors and the broader financial system. These adjustments influence a bank’s lending capacity and risk appetite.
Context
A significant capital requirement change is currently being debated regarding banks’ exposure to crypto assets. Regulators are considering how to appropriately weigh the risks associated with holding digital assets, which could substantially impact banks’ ability to participate in the crypto market.
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