Question 95

The minimum Total Risk-Based Capital ratio for a bank to be considered well capitalized is 10.00%.

A bank must maintain a Total Risk-Based Capital ratio of at least 10.00% to meet the well-capitalized requirement under Prompt Corrective Action thresholds, ensuring it has sufficient capital to absorb potential losses.

A) 6.50%

A Total Risk-Based Capital ratio of 6.50% is below the required threshold for a bank to be considered well capitalized. As such, banks operating at this level may face regulatory scrutiny and are classified in a less favorable capital category.

B) 8.20%

An 8.20% Total Risk-Based Capital ratio is also insufficient for a bank to qualify as well capitalized. This level fails to meet the minimum requirement of 10.00%, indicating that the bank may not have adequate capital to withstand financial stress.

C) 10.00%

A Total Risk-Based Capital ratio of 10.00% precisely meets the minimum requirement for a bank to be classified as well capitalized under Prompt Corrective Action thresholds. This level reflects that the bank maintains sufficient capital to support its risk exposure.

D) 12.0%

While a Total Risk-Based Capital ratio of 12.0% exceeds the minimum threshold for well-capitalized banks, it is not the minimum requirement. Thus, while it indicates a strong capital position, it does not answer the question regarding the minimum standard.

Conclusion

The correct answer is 10.00% as it is the established threshold for a bank to be considered well capitalized under Prompt Corrective Action. Options A and B fall short of this requirement, indicating inadequate capital levels, while D exceeds it without being the minimum. Therefore, C is the only choice that accurately reflects the necessary standard.