Capital Adequacy (CA)

CRITERIA AND DETERMINATION

Fusion Bank is assessed for Capital Adequacy by five possible net worth categories which are: “well capitalized,” “adequately capitalized”, “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”

Determining the adequacy of Fusion Bank’s capital begins with a qualitative evaluation of critical variables that directly bear on the institution’s overall financial condition. Included in the assessment of capital is the examiners opinion of the strength of the bank’s capital position over the next year or several years based on the Bank’s plan and underlying assumptions.

Capital is a critical element in the Bank’s risk management program.

The examiner assesses the degree to which credit, interest rate, liquidity, transaction, compliance, strategic, and reputation risks may impact on the Bank’s current and future capital position. The examiner also considers the interrelationships with the other areas:

  • Capital level and trend analysis;
  • Compliance with risk-based net worth requirements;
  • Composition of capital;
  • Interest and dividend policies and practices;
  • Adequacy of the Allowance for Loan and Lease Losses account;
  • Quality, type, liquidity and diversification of assets, with particular reference to classified assets;
  • Loan and investment concentrations;
  • Growth plans;
  • Volume and risk characteristics of new business initiatives;
  • Ability of management to control and monitor risk, including credit and interest rate risk;
  • Good historical and current earnings performance enables a Bank to fund its growth, remain competitive, and maintain a strong capital position;
  • Liquidity and funds management;
  • Extent of contingent liabilities and existence of pending litigation;
  • Field of membership; and
  • Economic environment.

RATINGS

Banks that maintain a level of capital fully commensurate with their current and expected risk profiles and can absorb any present or anticipated losses are accorded a rating of 1 for capital. Such Banks generally maintain capital levels at least at the statutory net worth requirements to be classified as “well capitalized” and meet their risk-based net worth requirement. Further, there should be no significant asset quality problems, earnings deficiencies, or exposure to credit or interest-rate risk that could negatively affect capital.

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