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]
- Financial policies, investment, and the financial crisis: Impaired credit channel or diminished demand for capital? – papers.ssrn.com [PDF]
- Impaired capital reallocation and productivity – www.cambridge.org [PDF]
- The economic consequences of relaxing fair value accounting and impairment rules on banks during the financial crisis of 2008-2009 – papers.ssrn.com [PDF]
- Cross‐border financial surveillance: a network perspective – www.emerald.com [PDF]
- Impaired financing determinants of Islamic banks in Malaysia – ojs.amhinternational.com [PDF]
- Does the lack of financial stability impair the transmission of monetary policy? – www.sciencedirect.com [PDF]
- Access to capital, investment, and the financial crisis – www.sciencedirect.com [PDF]
- Trends in park tourism: Economics, finance and management – www.tandfonline.com [PDF]
