Question

If the bank has a desired PCA target of well-capitalized but is under one of the risk-based ratios, what kinds of actions could it take to meet that threshold ratio?

Answer 1

If the bank has desired prompt corrective action target of well capitalised, but it is under one of the risk based ratios then,it will be trying to take following action in order to meet the desired ratio-

A. It can be going into sale of equity in order to raise funds and it will be helping them in order to manage the assets better by being capitalised.

B. They can also sale their bad loans and realise cash in hand in order to stay more liquid and have more lending ability.

C.they can be also doing various sale of assets in order to realise cash and increase the liquidity in their hands.

D. They can adopt various measures of cutting of employees so that they can be ensuring reduction in the overall cost of operations.

E.they can be issuing preferential allotment to various equity shareholders in order to generate an interestinterest and capitalise themselves