Exercise $8-9$ Maintaining capital adequacy $($LO $8-1)$

Required:

Why do regulators require banks and insurance companies to maintain minimum levels of investor capitar?

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Regulators require banks and insurance companies to mairtain minimum levots of irvestor capital because of the nature of the threat under which banks operate. This designed protection allows banks to sustain unexpected lossers.

What impact does this type of regulatory requirement have on the financial statements that banks and insurance companles prepare for shareholders?