A Bank's Net Worth Is Equal to Its Total Assets Minus Total Liabilities
A bank's net worth is equal to its total assets minus total liabilities. This figure is also called bank capital or equity. It represents the residual interest that would remain if the bank settled all its obligations.
Why Net Worth Matters for a Bank
Net worth acts as a financial cushion against losses. Regulators require banks to maintain a minimum capital level to protect depositors and support stability. A higher net worth generally signals stronger solvency and lower risk of insolvency.
How Net Worth Is Reported
On a bank's balance sheet, net worth appears as shareholders' equity or retained earnings. It includes common stock, additional paid-in capital, and retained profits. For a detailed breakdown of banking capital standards, see the Federal Deposit Insurance Corporation capital guidelines.
