Explanation:
Economic capital is the amount of capital that a bank estimates it needs to cover the risks it is taking, based on its own internal models and risk assessments. This differs from regulatory capital, which is the minimum capital required by regulators. Economic capital represents the bank's own view of the capital needed to remain solvent at a given confidence level over a specific time horizon.
The minimum level of capital a bank needs to maintain, according to its own estimates, models, and risk assessments, is best described as its:
A
Equity capital.
B
Financial capital.
C
Economic capital.
D
Regulatory capital.
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