"Tier 1 capital ratio was set at 6% of a bank's risk-weighted assets."
And interestingly enough, the Treasuries that now constitute a substantial portion of certain banks' underwater assets have a risk weighting of 0, meaning they aren't counted in the Tier 1 capital ratio at all.
"Your cash is an asset to you and a liability to your bank."
Waxing pedantic here: Although I have substantial bank deposits, I don't consider bank deposits to be cash. The cash in my pocket and in my 'mattress' isn't a liability to my bank. Yes, I'm an old fart who actually still carries cash on my person at all times and has some additional physical cash stockpiled.
I keep a small stash of cash in my ‘mattress’, as well. There may come a day when a severe solar flare (or terrorist) destroys the electrical grid in my city for weeks, and cash will be about the only medium of exchange at the grocery store. (And yes, I realize that the stores would be closed, but an armed guard might admit people through the door if they flash a wad of cash.)
Another excellent column, Mr. Kust! You’ve answered the questions simmering on the back burner of my brain. You have a real talent for explaining things to those of us who are not financial professionals- thank you!
"Tier 1 capital ratio was set at 6% of a bank's risk-weighted assets."
And interestingly enough, the Treasuries that now constitute a substantial portion of certain banks' underwater assets have a risk weighting of 0, meaning they aren't counted in the Tier 1 capital ratio at all.
"Your cash is an asset to you and a liability to your bank."
Waxing pedantic here: Although I have substantial bank deposits, I don't consider bank deposits to be cash. The cash in my pocket and in my 'mattress' isn't a liability to my bank. Yes, I'm an old fart who actually still carries cash on my person at all times and has some additional physical cash stockpiled.
I keep a small stash of cash in my ‘mattress’, as well. There may come a day when a severe solar flare (or terrorist) destroys the electrical grid in my city for weeks, and cash will be about the only medium of exchange at the grocery store. (And yes, I realize that the stores would be closed, but an armed guard might admit people through the door if they flash a wad of cash.)
Another excellent column, Mr. Kust! You’ve answered the questions simmering on the back burner of my brain. You have a real talent for explaining things to those of us who are not financial professionals- thank you!