BROWSE

Impaired Capital

What is 'Impaired Capital'

1. When a bank's actual assets are worth less than their stated value. When a bank has impaired capital, this capital can be liquidated if the bank cannot make up the deficiency. State laws define the treatment of a bank with impaired capital.


2. When a company's actual assets are worth less than the stated value of the company's outstanding shares.

Explaining 'Impaired Capital'

In the case of a bank with impaired capital, one option for making up the deficiency is that the bank's board of directors can choose to levy and collect pro rata assessments on common stock to restore the impaired capital. If stockholders do not pay the assessments within a specified time frame, usually three to four weeks, the bank's board of directors can choose to sell enough of the stockholder's shares to collect the assessment.


Further Reading


The impact of bank ownership concentration on impaired loans and capital adequacy
www.sciencedirect.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Financial policies, investment, and the financial crisis: Impaired credit channel or diminished demand for capital?Financial policies, investment, and the financial crisis: Impaired credit channel or diminished demand for capital?
papers.ssrn.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Impaired capital reallocation and productivityImpaired capital reallocation and productivity
www.cambridge.org [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

The economic consequences of relaxing fair value accounting and impairment rules on banks during the financial crisis of 2008-2009The economic consequences of relaxing fair value accounting and impairment rules on banks during the financial crisis of 2008-2009
papers.ssrn.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Cross‐border financial surveillance: a network perspectiveCross‐border financial surveillance: a network perspective
www.emerald.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Impaired financing determinants of Islamic banks in MalaysiaImpaired financing determinants of Islamic banks in Malaysia
ojs.amhinternational.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Does the lack of financial stability impair the transmission of monetary policy?Does the lack of financial stability impair the transmission of monetary policy?
www.sciencedirect.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Access to capital, investment, and the financial crisisAccess to capital, investment, and the financial crisis
www.sciencedirect.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …

Trends in park tourism: Economics, finance and managementTrends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… 1. Introduction. How does concentrated ownership affect bank riskiness? The corporate finance literature comes up with different answers to this question … In contrast to Caprio et al. (2007), we focus on impaired loans and capital adequacy instead of the value of the bank …



Q&A About Impaired Capital


Why might a bank or trust company have loan losses?

A bank or trust company may have loan losses because they are unable to collect on loans made to customers.

What is impaired capital?

Impaired capital is when the total value of a company's stock falls below its par value.

How can you correct impaired capital?

Once total capital returns to a level higher than the par value of the capital stock, you can correct your impaired capital.

What does it mean if severely impaired capital causes liquidation?

If severely impaired capital causes liquidation, then it means that your company will be forced to close down.

How can you restore impaired capital?

You can restore impaired capital by levying and collecting pro rata assessments on common stock to restore the impairment. If stockholders do not pay these assessments within a specified time frame, usually three to four weeks, then the board of directors can choose to sell enough shares to collect the assessment.

What does the term "stated value" mean in this context?

The stated value means the total amount of money that has been invested in a company or bank.