OP was talking about financial capital. Financial capital is the difference between assets and liabilities. If the company was liquidated right now, what would remain is the financial capital, so in a manner of speaking it's the net worth of a corporation. Regulators require banks to keep a certain amount of financial capital in accordance with the risks that they take and various other parameters in order to make sure that they are able to absorb big losses without going bankrupt.
Yeah, I'm aware of the basic investopedia definition. What I don't understand is what are those assets exactly? What kind of assets can be counted as capital? Vault cash? Reserves held at the Fed? And is a performing loan capital? It's an asset that can be sold to other banks. If that's the case, then can't a bank increase its capital by originating good loans? If that's so, then capital requirements don't particularly appear to operationally constraint loan origination and deposit creation.
