Economic capital refers to the amount of capital that a bank, based on its own internal models and risk assessments, determines it needs to maintain to cover potential losses over a certain time horizon at a given confidence level. This is distinct from:

• Regulatory capital: The minimum capital required by regulators
• Equity capital: The actual equity funds available
• Financial capital: A broader term encompassing all financial resources

Economic capital represents the bank's internal view of the capital needed to support its risk-taking activities.