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Reply #4: I share much of your ignorance, but let me offer up this on "undercapitalized". [View All]

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Home » Discuss » Topic Forums » Economy Donate to DU
Kennah Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Aug-15-11 03:42 PM
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4. I share much of your ignorance, but let me offer up this on "undercapitalized".
I'm an IT nerd, but my last gig was working for a bank--actually an S&L.

Anywho, "well capitalized" means a 10% capital ratio. Less than 8% is "undercapitalized".

If a bank makes a loan for $100K, and has $10K in cash assets of their own money (not counting depositors money if I understand this shit correctly), then they are "well capitalized". If they had less than $8K of their own money, they would be "undercapitalized".
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