<p>It is included at book value (not at market value) since that is the actual cash that was injected.
So banks can indeed use this cash</p>

CC BY-SA 4.0
2019-06-22T06:32:29.873Z
2019-06-22T06:32:29.873Z
Randor
<p>Capital represents the loss-absorbing capacity of a bank. I do not understand how shares issued in the past provide any indication of a bank's loss-absorbing capacity. I understand that common equity does not carry with it an obligation to repay, but it is not like banks can "draw down" on the value of its outstanding share in the event it experiences severe losses.</p>

<banking><regulation>
Why is common stock included in bank capital?
Ryan da Silva
# Why is common stock included in bank capital?

(Asked by: username_0 on 2019-06-22)

Capital represents the loss-absorbing capacity of a bank. I do not understand how shares issued in the past provide any indication of a bank's loss-absorbing capacity. I understand that common equity does not carry with it an obligation to repay, but it is not like banks can "draw down" on the value of its outstanding share in the event it experiences severe losses.

**Tags:** banking, regulation


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## 1 answers

### Answer by username_1 on 2019-06-22. Score: 0

It is included at book value (not at market value) since that is the actual cash that was injected.
So banks can indeed use this cash


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