As a specialist lender, the bank has no expertise in handling working-capital loans.
So banks have an incentive to keep to a minimum their ratios of capital to loans (or assets).
More important was last autumn's massive injection of public capital, loans and loan guarantees into the financial system, and this spring's bank stress tests.
Subtract the broken promises, and around 75, 000 jobs have been created through Sofirem's offer, mainly to small and medium-sized companies, of venture capital, loans, grants and expertise.
This is the proposal that the biggest UK banks should have enough capital, plus loans that could be converted into capital, to cope with losses equal to one-fifth of the size of their total balance sheet.
Some think they should set aside a sliver of capital even for loans they sell on.
Banks could then apply their capital to new loans to support economic growth.
FORBES: A Monster Real Estate Paradigm Shift Demands A New Direction for Capital
You can try, and Matthew Swibel's article about microfinance--the business of putting capital into small loans to struggling entrepreneurs--will give you some inspiration.
Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid.
FORBES: Governments Are The Primary Creators Of Systemic Risk
The business will become even more attractive to commercial banks next year when new capital standards mean banks can set aside less capital against margin loans to hedge funds.
Business broker experts expect more owners and CEOs to consider selling their companies as baby boomers head into retirement, businesses recover from the recession and banks loosen up capital for business loans.
Governments are fighting to save their economies from a liquidity trap in which individual banks choose, rationally, to shore up their capital by withdrawing loans from healthy firms and households, but collectively tip the economy into depression.
The Vickers Commission, set up the chancellor, recommended that there should be a ratio of 4.06% of pure equity capital to gross loans and investments, as what is known as a "backstop leverage cap", for the biggest banks.
New capital requirements that take effect next year will make the business more attractive to commercial banks, which right now have a disadvantage to the brokers because they have to set aside more capital against margin loans to hedge funds.
The Chinese banks have time to find more capital because the loans being made this year will not go bad for some time--and because investors are unconcerned that questionable loans are being rolled over with the approval of Beijing's look-the-other-way regulators.
Mortgage companies make loans and then sell them into the secondary market, freeing up capital to make more loans.
Banks must maintain a minimum amount of capital (equity, mainly) in relation to their loans: the riskier the loans, the more capital they must have.
Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital.
With the help of private investors, financial intermediaries have raised billions in fresh capital to repay government loans and rebuild battered balance sheets.
The BOE's Funding for Lending Scheme contains substantial incentives for banks to boost their loan books by waiving regulatory capital charges on new loans.
But each of them, on the simpler measure of gross leverage - that unweighted ratio of loans to capital - was a nano-distance away from the cliff edge.
As these and other policies boosted savings by constraining consumption, other policies, like those aimed at engineering massive loans to capital-intensive manufacturing at very low interest rates, forced rapid growth in domestic production.
This frees up capital to make new loans, and the lenders can earn more money by the fees they receive for putting together the deals than they could if they held the borrowings on their books.
And it just so happens that the small banks with the greatest concentration of commercial real estate exposure (CRE loans equaling three times tier one capital) account for 40% of small business loans.
Executives at several American banks said they were reluctant to lend not only because of concerns about creditworthiness, but also because of the heavy paperwork involved in government guaranteed loans, their own weak capital bases, and a desire to limit their already considerable holdings of similar loans to other countries.
Worse, adjusted for the riskiness of the banks' loans (decent credits now usually go to the capital markets), the reserves-to-loans ratio is at its lowest in 50 years.
Banks did not expand their loans because their capital was constrained and loan demand was weak.
Allied Capital has a portfolio of loans to telecom, outsourcing and consumer products companies, and yields 8.4%.
And that will translate into fewer loans and venture capital dollars for hardware, software and technology services.
The second main worry has been whether banks were holding enough capital as a cushion against loans that turn bad.
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