Abstract
IN view of the approaching revision of the Act in 1964, it may now b( appropriate to re-examine contemporary opinion and practice concerning commercial bank capital. It is tempting to inquire whether there is an optimumr ratio of capital to assets towards which commercial banks should aim. The traditional economic function of capital accounts has been to protect bank depositors against loss caused by depreciation of bank assets. Bank capital is in effect a first line of deposit guarantee. Any supervisory standard for measuring capital adequacy should be expressed in terms of the function of bank capital. The function of bank capital is to protect the bank creditors, mostly depositors, against ultimate loss.'
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