Hi danu,
Your Capital Aequacy Policy should address the following questions. Think in terms of what your institution should be doing to ensure capital adequacy. These question can be your business requirements that should drive the behavior in the control processes relating to capital adequacy.
Do operating policies, including the strategic plan, budget and dividend policy, promote capital preservation, and an appropriate return on assets and equity?
Has management established adequate internal controls for its capital and treasury activities?
Do internal reviews and audits discuss deficiencies in capital and treasury activities, and reports are provided directly to senior management and the board?
Have adequate information and communication systems been established with produces to ensure accurate information?
Has management proven ability and experience to maintain an adequate capital base?
Does the level of capital allow for continued operations if operating losses or other adverse financial results are experienced?
Do earnings retention sufficiently augments capital to provide for future growth, capital maintenance, and potential losses?
Is management's dividend policy reasonable?
Is capital adequate to support anticipated asset growth?
Are capital levels sufficient to provide for adequate protection from the risks associated with concentrations, Special Mention, adversely classified assets, and other contingencies?
Is securities depreciation insignificant?
Is capital sufficient relative to the bank's liquidity needs?
Is capital sufficient relative to interest rate risk?
Is the level of capital in compliance with applicable laws and regulations?
Does the bank holding company not use extensive double leverage?
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