Economic Capital: A New Measure of Bank Solvency

Beverly Hirtle and Matthew Plosser

No 20250903, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Bank supervisors, industry analysts, and academic researchers rely on a range of metrics to track the health of both individual banks and the banking system as a whole. Many of these metrics focus on bank solvency—the likelihood that a bank will be able to repay its obligations and thus retain its funding and continue to supply services to consumers, businesses, and other financial institutions. We draw on our recent research to describe a new solvency metric that is more forward-looking, more timely, and more comprehensive in its assessment of solvency than many current measures.

Keywords: economic capital; bank solvency (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2025-09-03
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