The Texas ratio is a metric used to assess the extent of a

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...

problems. Developed by Gerard Cassidy and others at

RBC Capital Markets RBC Capital Markets is a global investment bank providing services in banking, finance, and capital markets to corporations, institutional investors, asset managers, and governments globally. Locations span 58 offices in 14 countries across North ...

, it is calculated by dividing the value of the lender's non-performing

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...

s ( NPL + Real Estate Owned) by the sum of its

tangible common equity Tangible common equity (TCE), the subset of shareholders' equity that is not preferred equity and not intangible assets, is an uncommonly used measure of a company's financial strength. It indicates how much ownership equity owners of common stoc ...

capital and loan loss reserves. While analyzing

Texas Texas ( , ; or ) is the most populous U.S. state, state in the South Central United States, South Central region of the United States. It borders Louisiana to the east, Arkansas to the northeast, Oklahoma to the north, New Mexico to the we ...

banks during the

early 1980s recession The early 1980s recession was a severe economic recession that affected much of the world between approximately the start of 1980 and 1982. Long-term effects of the early 1980s recession contributed to the Latin American debt crisis, long-lastin ...

, Cassidy observed that banks typically failed when this ratio reached 1:1, or 100%. He later identified a similar pattern among

New England New England is a region consisting of six states in the Northeastern United States: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. It is bordered by the state of New York (state), New York to the west and by the ...

banks during the early 1990s recession.

References

External links

Current Texas Ratios for all US Banks and Credit Unions
* Current Texas Ratios for US Banks Updated May 21st 201

* Complete list of US banks and their Texas ratios as published i

and an updated listing published i

th

includes notes how the tables were created (that the ratio was multiplied by 100 for easier comprehension, etc.) Banking Credit Debt Financial ratios {{bank-stub