What are the functions of bank capital?

Bank capital serves several key functions, including providing a buffer against losses, which helps maintain financial stability and protect depositors. It supports the bank's ability to absorb unexpected financial shocks and reduces the risk of insolvency. Additionally, sufficient capital enhances a bank's ability to lend and invest, fostering growth and facilitating compliance with regulatory requirements. Lastly, strong capital levels can improve a bank's reputation and credibility with investors and customers.