Understanding Bank Capital Requirements
A bank keeps its own balance sheet
Every other kind of firm has its assets and liabilities consolidated into the corporate balance sheet. A bank does not — for two reasons. It gives you a clear view of the bank’s own operation, and it keeps the parent corporation’s balance sheet from being distorted by the enormous assets and liabilities that customer deposits and loans produce.
| Line | Side of the sheet | Why |
|---|---|---|
| Deposits by customers | Liabilities | The bank owes that money to its customers, and owes them interest on it. |
| Loans to customers | Assets | The bank expects interest and principal back from the borrowers. |
| Net assets | — | Also called shareholders’ equity: total assets minus total liabilities. |
The capital ratio
Watch the net assets figure, because the central bank requires every bank to hold enough capital to absorb unexpected losses and stay solvent through a crisis. That is the bank capital requirement.
At the bottom of a bank’s balance sheet you will find the Bank Capital Ratio and the Required Bank Capital Ratio. The capital ratio is:
equity capital (net assets) ÷ total loans to customersIt must meet the central bank’s requirement.
When the ratio falls short
An alert window appears, showing your bank’s current ratio, the required ratio and the shortfall.
Click [Transfer Fund] to open the transfer interface.
Set an amount and press [Transfer to Bank]. Once the bank is compliant, right-click anywhere to close the window and carry on.
Three ways to be told about it
If the alert window interrupts you too often, change the notification mode on the bank’s Balance Sheet page.
1. Must Take Action — the default
The game pops up the alert window whenever the capital ratio is insufficient.
2. Notification Only
No window. Instead the game does two things.
It stops issuing new loans, and shows an icon on the bank’s Overall and Loans pages.
It notifies you through the Event Tracker — the flashing icon at the bottom left of the screen, the same alert you get when a product supply link breaks.
Click the Event Tracker icon to read the message.
3. No Notification
Lending stops and nothing tells you.
Not recommended. A capital ratio depleting without your knowledge is exactly the situation you want to avoid.
Strategy guides
- Mastering Bank Management: A Comprehensive Guide, by Stylesjl
- Bank Setup and Management Video Guide, by YouTuber Lightproton