I. Introduction Bank capitalization refers to the amount of capital or equity that a bank has to absorb potential losses and to support its lending activities. Maintaining adequate levels of bank capitalization is crucial for ensuring the long-term financial stability of a bank and for maintaining the confidence of depositors, investors, and regulators. In this article, we will explore the topic of bank capitalization and its importance for the banking system. II. How are banks capitalized? Bank capital is defined as the funds that a bank raises from investors and retains to support its operations. There are several types of capital that a bank can utilize, including common equity, preferred equity, and subordinated debt. Common equity: Common equity is the most basic type of bank capitalization and represents the residual value of a bank’s assets after all liabilities are subtracted. This type of capital gives investors ownership in the bank and the potential for capital appreciation if the bank performs well. Common equity is considered the most reliable form of bank capitalization, as it cannot be called for repayment by the bank and is therefore the most permanent. Preferred equity: Preferred equity is a type of bank capitalization that gives … Continue reading How US Banks are Capitalized: A Comprehensive Guide