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| Capital is a very hard limit, then and now. Yes minor changes both ways over last 20 years. If bank is lacking capital, they need to recapitalize or reduce assets, no borrowing out of it and regulators will be watching their every move. It is quite rare as collectively banks are over capitalized by a large margin. I think average is around 13%. At around 8%, which isnt the bare minimum, bank management and regulators will likely bind a Memorandum of Understanding document on how and when to resolve this.
One exception to the borrowing point, if a bank has a holding company, the holding company can borrow at a different bank by pledging it's own shares as collateral and inject the proceeds down into the bank as a capital injection. This is allowed. Most banks issuing these kinds of loans are very picky about underwriting them.
Edited by reformedbanker 12/28/2025 09:05
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How money is created
