Is such summary reasonable?

Provisions = predicted losses should reduce profit already now. (giving stimulus for a bank to make necessary responses already now)

Capital adequacy = bank must use equity when issuing loans. (risk also "own" money not only "deposits")


Sort of. (But I don't really like the way you put it).

The purpose of capital adequacy regulations is to protect the depositors (and senior creditors). The capital is a kind of "cushion" that protects the creditors if assets go bad.

The purpose of provision regulation is to make sure that the capital figures are accurate: as soon as losses are predicted they must reduce capital. Otherwise the bank could lie about its true capital (overstating it) by pretending that it does not know of any upcoming losses and thus get around the capital adequacy regulation.

So the latter regulation strengthens the former.


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