Guaranteed Capital

Guaranteed Capital 

the ready capital of shareholder land banks, savings banks, and insurance companies. In many capitalist countries, such as the United States and the Federal Republic of Germany, it is usually kept in a liquid form, such as cash or other readily negotiable means, and it amounts to a definite percentage of the sum of the bank’s obligations. For example, in the state of New York, in the USA, it must be no more than 10 percent. Guaranteed capital is intended for fulfilling obligations to depositors and other creditors and for controlling the amounts of long-term stock investments at the expense of drawing funds and loan funds. It is formed from shareholders’ payments and augmented by deductions from profits. In contrast to corporate capital reserves, guaranteed capital cannot be used for such purposes as paying dividends or covering losses.

M. G. POLIAKOV