Reserve Capital

Reserve Capital

 

assets set aside by a joint-stock enterprise or a bank for certain purposes or as a general reserve (declared reserves). Reserve capital and fixed capital constitute the assets available to an enterprise (or bank) but not subject to distribution among the stockholders.

Reserve capital is used to write off unrecoverable debts and losses and to pay taxes and interest. It is also used when the market value of securities declines, and it may serve as collateral for future capital payments.

Reserve capital is invested in highly liquid assets (securities) and is often used for the current needs of an enterprise or bank. The reserve consists of annual deductions from profits. The minimum reserve capital and the procedure for its accumulation are stipulated in the laws governing joint-stock companies or in their statutes. For example, in France enterprises are obliged to deduct one-twentieth of their annual net profits for reserve capital, until the reserve equals 10 percent of the share capital. The total reserve capital of a bank is usually significantly greater than its total stock (share) capital, and the reserve capital of a major bank is generally several times its total stock capital. Reserve capital is entered as a liability on the balance sheet of an enterprise or bank.

References in periodicals archive ?
Through this contribution, the EU supports a risk transfer mechanism for the Central American countries and the Dominican Republic by establishing reserve capital to support access to risk insurance for natural disasters.
Arrow Funds launched the Arrow Reserve Capital Management ETF (ARCM) on the Bats Global Markets Exchange.
The CBO Executive President also pointed out that as part of the continuous application of Basel III, the CBO has issued a paper of ideas on supporting reserve capital at the end of 2015 while the steering principles will be issued during 2016 to facilitate the implementation of the International Financial Reporting Standard "IFRS 9" in the Sultanate.
The service also eliminates the need to purchase equipment and shifts the purchasing model to a subscription fee, giving customers the ability to reserve capital for other purposes.
In any case, Bank of America performed better than Citi or JPMorgan Chase, let alone Goldman or Morgan Stanley, in the Federal Reserve capital adequacy "stress tests".
He answered more questions about Fannie Mae and Freddie Mac's capital level saying the preferred stock agreement that was put into place when they were conserved effectively prohibited them from building up any reserve capital.
Analysts are of the opinion that JPMorgan Chase (NYSE :JPM) would need significant money to meet the Federal Reserve capital rules.
In addition, Galliford Try Infrastructure working with AECOM have entered into an agreement with the company as a reserve capital partner.
Skanska Construction UK Limited working with Hyder Consulting (UK) Limited Mott Macdonald Bentley Limited Morgan Sindall working with Arup Galliford Try Infrastructure Limit-ed working with AECOM Limited have entered into an agreement with the company as a reserve capital partner.
It is believed that this method is the most conservative manner to maintain the reserve capital.
reserve capital to be called only if the bank experiences financial
The reserve capital of the company will amount to 450 mln drams.

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