Please help me understand capital shortfalls
Okay, so several investment banks in the UK face capital shortfalls according to the Bank of England under the new EU capital rules.
What can banks do to fill their capital shortfall? I am aware of a rights issue and a bond issue, but what other tools do banks have at their disposal?
Also, what are the long term implications of having to fill a capital shortfall? Can it affect the IBD for example?
Apologies for all the questions; I am extremely new to finance and I'm trying to get my head around everything. If someone could provide me a link which explains more on capital shortfalls I would be extremely grateful!
The long-term implication is less risky overall assets but also less profit.
In layman's terms, the bank has too little capital for the amount of risk they have on their books. This can be fixed either by raising new capital or reducing risk. The latter could many things.
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