Capital Buffer

  

Categories: Banking, Regulations

Banks are required to maintain a certain amount of capital. But then, on top of that (just for paaddding!), they're required to keep some extra capital on the side as buffer.

It's kind of like when your mommy used to make you wear kneepads, a helmet and ten layers of clothes before she helped you mount your bike (no wheelies!)? All that extra padding (hopefully) helped and served as buffer against a fall. Capital buffer's that extra padding in the middle.

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Finance: What is a Current Asset?16 Views

00:00

Finance, a la shmoop. What is a current asset? Current yeah it's kind of a [Picture of a currant on a plant]

00:08

socialist raisin there, you know they all look about alike but that's a [Soldiers marching in front of Stalin with currants for heads]

00:12

currant and has nothing to do with current as cur-rent remember it like

00:18

your rent comes due soon, you rent a place for a year or less usually or at [Guy sticks his head out of pile of overdue bills]

00:24

least that's how long, you know lock in your rental rate. So if your [Someone signing a contract]

00:28

asset is current then it can be turned into cash within a year. That's how we

00:34

remember it here around Shmoop. Examples? A bond coming due in a year or less. [Bond document]

00:38

Companies store their cash all the time in short term paper like certificates of

00:43

deposit or Bank CDs which come due in less than a year. that's a current asset. [List of short-term paper]

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And companies buy these kinds of bonds so they get a little more interest than

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from their banks you know checking account. They buy stocks as well, shares [New interest rate is very small]

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of goog can be easily converted into cash quickly. Shares in Google are a [Current asset stamp]

01:01

current asset. Ounces of gold, yep easily a current asset. All right you get the

01:06

idea, so what's not current well fourteen thousand acres of solar panel land that [Huge fields full of solar panels]

01:11

your company owns. If you ever had to sell it while there are very few buyers

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and it likely would take more than a year just to figure out all the [Calendars popping up]

01:18

regulatory restrictions on selling it. A big old factory well can't sell that on [Red cross appears on a factory]

01:23

Amazon or Ebay, definitely not current. Your brand equity

01:27

in your corporation like the relationship you've developed with your

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consumers, yeah it's another non-current asset you can't exactly go to the bank [Guy going up to the bank and pleading]

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and convert brand loyalty to USD. So that's it current assets they live here [Arrow pointing to current assets on a balance sheet]

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on this side of the balance sheet way up top in the good view seats high on the [Current assets in a tree]

01:45

vine of the tree. So put down those currants, stop ranting about the [Stalin holding a currant]

01:49

proletariat and for God's sake just buy some raisins. [Guy pointing to a box of raisins]

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