How does Pragcap define banking capital ratios?
The traditional definition seems to be applicable for a bank that operates on the “deposits create loans” money multiplier model. In fact all the Basel regulations are based around that where banks are supposed to set aside something like 8% of their capital to cover their deposits or something.
I think Cullen and others mentioned here that how much money a bank can lend is restricted by its “capital ratios”. So I was wondering how are you defining your capital ratios thats different to the traditional one?
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