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For any firm: "Earning net income increases retained earnings." Ofc conversely, negative income decreases retained earnings... diagram: And then more specifically for Bank accounting: The bank capital can be thought of as the book value of shareholders' equity on a bank's balance sheet. Because many banks revalue their financial assets more often than companies in other industries that hold fixed assets at a historical cost, shareholders' equity can serve as a reasonable proxy for the bank capital. Typical items featured in the book value of shareholders' equity include preferred equity, common stock and paid-in capital, retained earnings,... So negative income at the bank reduces bank capital... and will decrease any regulatory ratio of capital:assets...
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For any firm: "Earning net income increases retained earnings." Ofc conversely, negative income decreases retained earnings... diagram: And then more specifically for Bank accounting: The bank capital can be thought of as the book value of shareholders' equity on a bank's balance sheet. Because many banks revalue their financial assets more often than companies in other industries that hold fixed assets at a historical cost, shareholders' equity can serve as a reasonable proxy for the bank capital. Typical items featured in the book value of shareholders' equity include preferred equity, common stock and paid-in capital, retained earnings,... So negative income at the bank reduces bank capital... and will decrease any regulatory ratio of capital:assets...
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Mike Norman considers the following as important:
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For any firm:
"Earning net income increases retained earnings."Ofc conversely, negative income decreases retained earnings... diagram:
And then more specifically for Bank accounting:
The bank capital can be thought of as the book value of shareholders' equity on a bank's balance sheet. Because many banks revalue their financial assets more often than companies in other industries that hold fixed assets at a historical cost, shareholders' equity can serve as a reasonable proxy for the bank capital. Typical items featured in the book value of shareholders' equity include preferred equity, common stock and paid-in capital, retained earnings,...
So negative income at the bank reduces bank capital... and will decrease any regulatory ratio of capital:assets...