How is net capital calculated? What is the formula for calculating net capital

Net Capital = Core Capital + Subsidiary Capital - Capital Deductions.

Net capital is a comprehensive regulatory indicator to measure the capital adequacy and asset liquidity of the company, and it is the part of the company's net assets that is highly liquid and can be quickly realized, which indicates the amount of funds that can be used to cash out at any time to meet the payment needs.

Through the monitoring of the company's net capital, the regulatory authorities can accurately and timely grasp the solvency of the company and prevent liquidity risks.

For banks: Net Capital = Core Capital + Subsidiary Capital - Deductions included.

Subsidiary Capital = Revaluation Reserves + General Provisions + Long-Term Subordinated Debt.

Deductions include: goodwill, capital investment in unconsolidated banking institutions, capital investment in non-bank financial institutions, investment in real estate not for self-use, capital investment in industrial and commercial enterprises, and loan loss provisions that have not been fully raised.

Net capital = core capital + subsidiary capital - capital deductions.

Core capital is the own funds that financial institutions can use and dispose of in perpetuity. Subsidiary capital, also known as supplementary capital and secondary capital, should include undisclosed reserves, heavy reserves, and ordinary doubtful debts.

Provisions, hybrid debt infiltration of capital instruments, etc. Capital deductions include: goodwill.

Capital investment in unconsolidated banking institutions, capital investment in non-bank financial institutions, etc.

The main purpose of the net capital indicator is:

First, the company is required to maintain sufficient and easily realizable liquid assets to meet urgent needs and resist potential market risks.

credit risk, operational risk, settlement risk, etc., so as to ensure the safety of customer assets.

Second, when the first company fails to operate, bankruptcy and closes, there are still some funds used to deal with the company's bankruptcy liquidation.

and other matters.

The formula for calculating the net capital of a commercial bank is as follows:

Net Capital = Core Capital + Subsidiary Capital - Deductions.

Core capital is the most stable and highest-quality part of the capital of a commercial bank, which can be permanently occupied by the bank and can be used for a long time to absorb the losses incurred by the bank in the process of operation and management. Its composition is as follows: paid-up capital.

Capital reserves, surplus reserves, and undistributed profits.

and minority stakes.

Ancillary capital includes: revaluation reserves, general reserves, preferred stock, long-term subordinated bonds, and convertible bonds.

At the same time, the total amount of subsidiary capital shall not exceed 100% of the total Tier 1 capital, that is, the core capital shall account for at least 50% of the total capital;

Deductions include: Slippery goodwill.

Capital investment in unconsolidated banking institutions, capital investment in non-bank financial institutions, investment in real estate not for self-use, capital investment in industrial and commercial enterprises, and provision for loan losses have not yet been fully raised.

For example, a commercial bank is known to have a paid-in capital of 2,000, a capital reserve of 600, a surplus reserve of 400, an undistributed profit of 200, a general provision for loan losses of 600, an investment risk reserve of 300, a non-self-use real estate of 500, a long-term financial bond of 600, an investment of non-financial institutions, and a weighted risk asset of 200 and 70,000. Calculate net capital.

Net capital of commercial banks = 2000 + 600 + 400 + 200 + 600 + 300 + 600 - 500 - 200 = 4000.

Hello Net Assets: Net Assets = Owners' Equity = Assets - Liabilities. It consists of two parts, one part is the capital invested at the beginning of the enterprise, including the premium part, and the other part is created by the enterprise in the course of operation, including the assets that receive donations.

Net Capital: Net Capital Net Assets Risk Adjustment for Financial Product Investment Risk Adjustment for Receivables Risk Adjustment for Other Current Assets Risk Adjustment for Long-term Assets Risk Adjustment for Contingent Liabilities Other Adjustment Items Identified or Approved by the China Securities Regulatory Commission. The Net Capital indicator reflects the highly liquid portion of net assets and indicates the amount of money that a company can cash out to meet payment needs and address risk.

Generally speaking, net capital is the amount after assuming that all the liabilities of the company are due at the same time, and all the existing assets are realized to pay off all the liabilities.

Net Capital (net

capital) = core capital + subsidiary capital - capital deductions.

Among them: 1. Core capital.

Core capital is the own funds that financial institutions can use and dispose of in perpetuity, and its composition is as follows:

1) Paid-up capital. It refers to the capital actually invested by investors in commercial banks in accordance with the articles of association, contracts and agreements.

2) Capital reserve. Including capital premiums and other capital reserves.

3) Surplus reserve. It includes both statutory and discretionary surplus reserves.

4) Undistributed profits. It refers to the undistributed profits or uncovered losses realized by commercial banks in previous years.

5) Minority stake. Refers to the minority interest in a non-wholly owned subsidiary included in the core capital at the time of the consolidated statements, i.e., the part of the subsidiary's net operating results and net assets that is not attributable to the parent company in any direct or indirect way.

2. Subsidiary capital.

Subsidiary capital is also known as supplementary capital, tier 2 capital (tier

capital)。The common feature of replenishment of capital is that it can only absorb losses for a limited period of time. It mainly includes undisclosed reserves, revaluation reserves, general doubtful debt provisions, hybrid debt capital instruments, etc. Therefore, it is calculated as follows:

Subsidiary Capital = Revaluation Reserves + General Provisions + Long-Term Subordinated Debt.

3. Capital deductions.

Capital deductions include: goodwill, capital investment in unconsolidated banking institutions, capital investment in non-bank financial institutions, investment in real estate not for self-use, capital investment in industrial and commercial enterprises, and loan loss provisions that have not been fully mentioned.

Assets - Liabilities = Net Capital.

Core Capital + Subsidiary Capital - Capital Deductions.