Why RWA, RAROC and Scarce Balance-Sheet Capacity Will Shape Future Strategy
Why capital is more than a regulatory buffer, how marginal RWA economics shape growth, and why the capital a bank preserves may matter as much as the capital it deploys.
Capital is not merely a regulatory buffer. It is the scarce institutional resource that determines which economic positions the bank can afford to own, what it can still choose later, and ultimately what kind of institution it becomes.
Banks are accustomed to thinking about capital as a constraint. Regulation establishes minimum requirements, supervisors add buffers and guidance, stress testing examines resilience, rating agencies consider loss-absorbing capacity, investors scrutinise returns on equity, and management plans dividends, buybacks and growth against the capital that remains available. All of this is necessary, but it does not capture the full strategic significance of capital.
Capital is also one of the mechanisms through which a bank chooses what kind of institution it will become. Every decision to grow a loan portfolio, enter a new business, retain a risk, support a subsidiary, expand into a market or absorb another institution commits some combination of CET1, risk-weighted assets, leverage capacity, liquidity, concentration headroom and management attention. Those commitments accumulate. Once capital has been deployed into one economic position, it is not simultaneously available for another without being replenished, released or reallocated.
This makes capital more than a prudential buffer. It makes capital a scarce institutional resource through which strategy becomes economically real.
The distinction is increasingly important because many banks currently appear exceptionally well capitalised. EU and EEA banks ended 2025 with a CET1 ratio of 16.3 percent and aggregate capital headroom of approximately 4.8 percentage points above overall capital requirements and Pillar 2 guidance. Strong profitability had increased CET1 capital to approximately EUR 1.67 trillion, while the sector distributed a record EUR 106 billion through dividends and share buybacks during 2025 and planned approximately EUR 117 billion of distributions for 2026. Yet the same supervisory assessment noted that rising risk-weighted assets had already begun to place some pressure on capital ratios during the first quarter of 2026 and that capital headroom remained highly uneven across institutions and countries.
The strategic implication is straightforward. A bank can possess substantial capital and still face capital scarcity because the relevant question is not simply how much capital exists. It is how much remains available after management accounts for existing risk, regulatory requirements, expected growth, stress capacity, shareholder distributions, investment commitments and the options the institution may need to exercise later.
Bancly describes this residual capacity as Strategic Capital Capacity: the amount of regulatory, economic and organisational capacity that remains available to fund growth, absorb uncertainty, support transformation and preserve future strategic choice after existing commitments have been recognised.
This produces three distinct capital questions. Capital adequacy asks whether the institution has enough capital to remain safe and compliant. Capital productivity asks whether the capital already committed is earning enough after risk. Strategic Capital Capacity asks whether sufficient capacity remains to shape the bank the institution intends to become. The first is prudential. The second is economic. The third is strategic. Future Banking Economics requires all three.
Capital Adequacy Is Not Capital Productivity
A well-capitalised institution is not necessarily an institution that allocates capital well. The distinction can be illustrated through two banks with identical CET1 ratios. Both may report strong capital headroom and both may satisfy supervisory expectations comfortably, yet one may have concentrated scarce balance-sheet capacity in businesses producing strong risk-adjusted returns while the other carries substantial capital in mature activities whose returns barely compensate shareholders for the risk assumed. Their prudential positions may appear similar. Their economic positions are not.
Regulatory capital establishes the amount of loss-absorbing capacity that must stand behind particular risks. It does not determine whether accepting those risks creates sufficient economic value for shareholders. That requires a second layer of analysis in which income, expected loss, funding, operating cost and capital consumption are considered together.
This is the economic purpose of measures such as risk-adjusted return on capital. RAROC is not important because every bank needs to use one standard formula, nor because one ratio can replace judgement. It is important because it forces management to recognise that revenue produced by two assets can have very different value once the risk and capital required to generate that revenue are included.
A loan yielding 8 percent can therefore be economically inferior to another yielding 6 percent if the first carries materially higher expected losses, servicing cost, funding requirements or RWA. A fee relationship generating less accounting revenue can create superior economics if it consumes little balance-sheet capacity and strengthens funding, transaction flows or future customer demand. A business can remain profitable in absolute terms while becoming a progressively weaker use of scarce capital as more attractive opportunities emerge elsewhere.
This is why capital productivity should not be confused with capital minimisation. The objective is not to consume as little capital as possible. The objective is to commit capital where ownership creates sufficient economic return and strategic value.
Some businesses deserve substantial balance-sheet capacity because permanent asset ownership is central to the bank’s advantage. Others deserve less because the customer relationship can be retained without retaining the entire risk. Still others may no longer deserve incremental capital even though the existing portfolio remains profitable. The discipline required is therefore comparative. Management should not ask only whether a business earns its hurdle rate. It should ask whether it earns enough relative to alternative uses of the same scarce institutional capacity. That is a much more demanding standard.
RWA Is Where Strategy Meets the Balance Sheet
Risk-weighted assets are often experienced primarily as a regulatory denominator. Capital ratios rise or fall depending on the relationship between eligible capital and the RWA attached to credit, market and operational risks. Strategically, RWA is more consequential. It converts different forms of economic activity into different claims on scarce capital.
The Basel Framework establishes minimum CET1, Tier 1 and total capital requirements relative to RWA, supplemented by the capital conservation buffer and additional buffers applicable to particular institutions or jurisdictions. RWA itself reflects credit, market and operational risks, with the framework explicitly designed to connect the level of required capital to the risk characteristics of exposures.
This means that two units of accounting assets can require materially different amounts of regulatory capacity. That difference can alter strategy. A bank can grow its balance sheet while consuming comparatively little incremental RWA, or it can experience modest nominal asset growth while RWA rises much faster because the composition of the portfolio changes. A shift towards higher-risk corporate exposures, unsecured lending, market activities or operational-risk-intensive businesses can alter capital consumption even if the headline balance sheet appears relatively stable. The opposite can occur when assets mature, are sold, securitised or shift towards lower-risk categories.
The economic relevance is therefore not the absolute amount of RWA alone. It is what the institution earns for each incremental unit of RWA consumed. This is where a conventional growth discussion becomes a capital productivity discussion.
Loan growth is no longer simply an asset-volume question. It becomes a question about the income, expected loss, funding cost, operating expense and customer economics generated per unit of incremental risk-weighted capacity. Business expansion becomes a question about the economic value created for each unit of capital committed. Strategic ambition becomes constrained by the rate at which the institution can generate, release and replenish capital.
This is why the future bank cannot treat RWA as a regulatory calculation sitting beneath strategy. RWA is one of the transmission mechanisms through which strategy enters the financial architecture of the institution.
The Economics of the Next Unit of RWA Matter More Than the Historic Average
One of the most important capital disciplines concerns the difference between average economics and marginal economics. A bank may report an attractive overall ROE because much of its current portfolio was originated under favourable conditions, benefits from low-cost funding or requires relatively little incremental investment. That does not mean the next unit of growth will produce the same economics.
The next loan may require a lower spread because competition has intensified. It may carry higher acquisition cost. It may consume more capital because the risk profile differs. Deposit funding may be more expensive at the margin. Credit costs may normalise from unusually low levels. Regulatory requirements may change. The customer may require additional services to make the relationship economically viable.
The existing portfolio can therefore report attractive returns while new growth creates materially weaker value. This is particularly relevant during periods of rapid balance-sheet expansion. Management can focus understandably on loan growth, market share and revenue while the incremental capital economics deteriorate beneath the aggregate numbers.
The appropriate question is not whether the historic portfolio generates a satisfactory return. It is whether the next unit of RWA does.
A useful marginal capital equation should therefore include the expected income generated by the new activity, the full economic cost of funding, expected credit losses, servicing and operating cost, liquidity requirements, RWA consumption, concentration effects and the amount of CET1 required to support the exposure. Where the relationship creates deposits, fees or other customer economics, those should also be recognised rather than evaluating the credit asset in isolation.
This produces a more complete understanding of growth. Some credit relationships may justify substantial capital because the lending exposure sits inside a broader economic relationship containing payments, deposits, foreign exchange, trade, wealth or advisory activity. Another exposure may generate a respectable spread but little relationship value and consume substantial RWA. The accounting yield can be attractive while the institutional economics remain weak.
This is why portfolio averages can become strategically dangerous when they conceal deteriorating marginal economics. The future bank needs to govern the return on new capital committed, not simply the historical return generated by capital already deployed.
Strategic Capital Capacity Is the Capital That Preserves Choice
Capital planning normally incorporates regulatory minima, management buffers, expected earnings, asset growth, dividends, stress outcomes and funding requirements. Future Banking Economics adds another consideration: optionality.
A bank does not know today every opportunity, shock or structural change it will face during the next five or ten years. New profit pools can emerge. An acquisition may become strategically attractive. A crisis can create opportunities to gain market share from weaker competitors. Technology may require substantial investment. Regulation may increase risk weights or capital buffers. Credit deterioration may absorb capital unexpectedly. A new business may require several years of investment before becoming self-funding.
The institution therefore derives economic value from having capital it has not yet committed. This is Strategic Capital Capacity. It is the difference between possessing enough capital to support the bank as currently configured and possessing enough capacity to change that configuration when circumstances require.
The distinction becomes particularly important because strong capital ratios can create pressure to distribute excess capital. Shareholders reasonably expect capital that cannot generate attractive returns to be returned rather than retained indefinitely. The record distributions reported by European banks illustrate the magnitude of this tension. Strong profitability has allowed banks to increase dividends and buybacks, while supervisors simultaneously emphasise the importance of preserving flexibility in case risk-weighted assets, credit losses or market volatility rise faster than expected.
The economic problem is therefore not solved by retaining every available unit of CET1. Excess capital that cannot be deployed productively can depress return on equity. Insufficient capital can constrain growth and resilience. Over-distribution can reduce future optionality.
The strategic task is to determine how much capacity the institution should deliberately preserve and what future choices justify retaining it. This changes the language of capital planning. The question moves from how much excess capital the bank has towards what that capital is being preserved to enable. A management buffer without a strategic purpose is merely unused capacity. A deliberately preserved capital option can be an asset.
Capital Regulation Is Changing the Relative Economics of Activities
Capital productivity cannot be assessed independently of the regulatory architecture because the rules governing RWA change the relative economics of different exposures.
The Basel III reforms were designed partly to improve comparability and reduce excessive variability in risk-weighted assets. Among the most consequential features is the output floor, which limits the extent to which internally modelled RWA can fall below the amount produced by standardised approaches. Under the Basel Framework’s phase-in schedule, the floor rises from 65 percent in 2026 to 70 percent in 2027 and ultimately 72.5 percent in 2028, although implementation timing and transitional arrangements differ across jurisdictions.
The strategic consequence is not simply that some banks may require more capital. The relative attractiveness of activities can change when their regulatory capital treatment changes. A business whose historic economics benefited materially from low modelled risk weights may become less attractive if effective RWA rises. Another activity may become comparatively more valuable without any improvement in its own underlying economics because the capital burden of competing uses has increased.
Recent European evidence already reflects this moving architecture. The EBA reported that implementation of CRR3 and CRD6 contributed to changes in RWA composition, including increases in operational-risk RWA, while the phased implementation of new rules is expected to continue affecting capital requirements.
This is why long-range strategy cannot treat current capital intensity as permanent. A business model that appears attractive using today’s RWA assumptions needs to remain attractive under plausible future regulatory treatment.
The relevant strategic discipline is therefore not regulatory prediction. It is assumption testing. Management should understand which profit pools depend heavily on favourable capital treatment, which businesses remain attractive even if RWA intensity rises, and where strategic choices should be preserved because regulatory economics remain uncertain. Capital rules do not merely determine how safe a bank must be. They influence what kind of banking activity is economically attractive to own.
Customer Ownership and Asset Ownership Are Becoming Separate Decisions
Article 05 established that financial profit pools are increasingly being recombined across origination, distribution, servicing, funding and asset ownership. Capital economics provide one of the strongest reasons for that recombination.
Historically, a valuable customer relationship often resulted naturally in the bank originating and retaining the corresponding asset. The customer wanted credit, the bank underwrote it, funded it and held the exposure on its balance sheet. That architecture remains appropriate in many cases. It should no longer be automatic.
Customer ownership and permanent asset ownership answer different strategic questions. Customer ownership concerns access to flows, information, pricing, deposits, origination and future financial demand. Asset ownership concerns whether retaining the exposure produces sufficient economic return after funding, expected loss, liquidity and capital consumption.
When both are attractive, the bank should have little hesitation about retaining the asset. When the customer relationship is attractive but the asset economics are weak, a different architecture may create more value.
The growth of bank partnerships with private credit providers illustrates this distinction. The IMF documented more than twenty such partnerships across several countries during the three years preceding its October 2025 Global Financial Stability Report. Many involve originate-to-distribute structures through which banks use their borrower networks to originate loans that are subsequently held by private credit funds, allowing the bank to retain origination and servicing fees and often provide additional banking services without permanently retaining the entire credit exposure.
The opportunity is strategically significant because the bank can potentially preserve customer primacy while reducing balance-sheet intensity. This does not mean every credit exposure should be distributed. Permanent asset ownership can create substantial value where the bank possesses superior underwriting information, low-cost funding, attractive RAROC and relationship economics that justify the capital committed.
The point is that asset ownership should become an explicit economic choice rather than an automatic consequence of customer acquisition. The bank should therefore be able to distinguish what it needs to own economically from what it needs to own legally on the balance sheet. That distinction will become increasingly important as capital becomes more actively managed across institutional boundaries.
Capital Recycling Is Becoming Part of Strategic Architecture
Banks have always managed capital through retained earnings, issuance, portfolio sales, securitisation and other forms of balance-sheet management. What is changing is the strategic importance of capital recycling.
Synthetic risk transfer provides one example. Rather than selling the underlying loans, a bank transfers a defined portion of credit risk to external investors while retaining the customer relationship and the assets themselves. When regulatory requirements for significant risk transfer are met, the transaction can reduce the RWA associated with the portfolio and release capital for other uses.
The market has expanded materially. The ECB reported that the outstanding stock of synthetic risk transfers in the euro area during the second half of 2025 increased aggregate bank capital ratios by approximately 0.5 percentage points, demonstrating that these transactions are becoming meaningful components of capital management rather than peripheral instruments.
The strategic attraction is clear. A bank can retain customer relationships and lending capability while transferring some of the unexpected-loss risk to external capital providers, potentially releasing capacity for new lending or other strategic uses.
The economic interpretation, however, requires more discipline than simply celebrating lower RWA. Risk transfer has a price. Investors need to be compensated. Transactions carry structuring, legal and operational costs. Regulators require genuine transfer of significant risk before capital relief is recognised. The ECB formalised supervisory expectations around these transactions through guidance published in late 2025, reflecting their increasing importance to regulated capital management.
Capital relief should therefore be evaluated as an economic trade rather than a regulatory optimisation. The correct question is whether the value created by releasing capital exceeds the cost of transferring risk and whether the capital that has been freed can be deployed into activities producing superior economics.
If a bank pays to release capital only to redeploy it into another low-return activity, the balance sheet has become more complex without creating meaningful value. Capital recycling is valuable when it improves the portfolio of economic positions, not merely when it lowers a denominator.
Capital Relief Can Create New Dependencies
The expansion of capital-light and risk-transfer structures introduces a second strategic consideration. A bank can reduce direct asset ownership while becoming dependent on external risk-bearing capacity.
The FSB’s 2026 review of private credit highlights increasingly complex interconnections between banks, private credit funds, insurers and private equity firms. It identifies bank financing of private credit vehicles, revolving facilities to common borrowers and growing use of synthetic risk transfers as channels through which risks can move across institutional boundaries. The FSB estimates private credit assets at approximately $1.5 trillion to $2 trillion at the end of 2024 and notes that the ecosystem has not yet been tested through a prolonged severe downturn at its current scale.
The ECB has made a related observation regarding synthetic risk transfer. While these structures can protect banks from credit losses and release capital, increasing reliance on investor demand for risk transfer could make banks dependent on continued availability of external risk-absorbing capital to support future lending.
This matters because capital optimisation can create an illusion of permanent capacity. A bank may build a growth model assuming it can repeatedly transfer risk to investors. If market conditions deteriorate and investor appetite disappears, the institution may need to retain more RWA precisely when its own capital generation is under pressure.
The same applies to originate-to-distribute models. Distribution can improve capital economics during benign conditions, but the bank needs to understand what happens if markets become less willing to absorb assets or if underwriting standards have weakened because the institution expected to distribute the exposure.
Strategic capital architecture therefore needs a resilience test. Management should ask not only how much capital a transaction releases, but whether the business model remains viable if that release mechanism becomes temporarily unavailable. This is why capital efficiency and resilience cannot be separated. The cheapest capital architecture in normal conditions may not be the most economically attractive architecture across the cycle.
Capital Productivity Requires Portfolio-Level Governance
Capital allocation is often performed business by business. Each division has targets, budgets, RWA limits and return expectations, and management aggregates these commitments into an enterprise capital plan. The future economic challenge requires a more dynamic portfolio perspective.
Capital should be continually compared across alternative uses. A lending book should compete not only against its own historic performance, but against other lending categories, transaction businesses, fee pools, acquisitions, technology investment, shareholder distributions and the value of retaining strategic optionality.
This introduces opportunity cost into capital governance. The capital consumed by one activity has an economic cost equal to the best alternative use that management can no longer pursue. The calculation will never be perfectly precise because strategy contains uncertainty, but the discipline matters.
A profitable business can deserve less capital if superior opportunities exist elsewhere. A currently modest business can deserve more if it creates a strong future economic position. A low-return business can deserve temporary support if it is necessary to preserve customer primacy or enable a broader relationship, provided that the transmission into enterprise economics is explicit and credible. A high-return business can deserve less if the returns depend on excessive concentration, favourable regulatory assumptions or risks that are not adequately reflected in current performance.
This is why capital allocation cannot be reduced to a league table of current RAROC. RAROC improves the decision by recognising risk and capital consumption, but strategic capital allocation also needs to recognise durability, customer control, optionality and the bank’s Right to Win. The relevant unit of analysis is the future economic portfolio.
Where Capital Sits Will Determine What the Bank Becomes
Capital allocation has an institutional consequence that extends beyond financial ratios. A bank that repeatedly allocates incremental capital towards conventional lending will become more balance-sheet intensive. A bank that increasingly reallocates towards payments, transaction banking, wealth, distribution and capital-light origination will become economically different even if its legal identity remains unchanged.
A bank that retains customer relationships while selectively distributing credit risk becomes different from one that assumes customer ownership requires permanent asset ownership. A bank that preserves substantial Strategic Capital Capacity becomes capable of responding to acquisitions, shocks and emerging profit pools differently from one whose capital is fully committed to existing businesses.
These are not abstract strategic identities. They emerge from repeated capital decisions. The bank becomes what it repeatedly funds.
This is why capital allocation deserves to sit much closer to the centre of enterprise strategy. Strategy documents can describe ambitious future positions, but if capital continues flowing principally towards yesterday’s economic architecture, the institution will continue becoming yesterday’s bank.
The financial plan therefore needs to prove the strategic thesis. If management says the bank intends to become more capital-light, the RWA trajectory should eventually demonstrate it. If the strategy emphasises transaction primacy, capital and investment should move towards the infrastructure and customer propositions capable of creating that position. If the institution intends to expand in higher-growth lending markets, the capital plan should show what existing activities will receive less capacity or how additional capital will be generated. If management intends to preserve optionality, the institution should identify the capital that is intentionally not committed and the conditions under which that capacity can be exercised.
Without that connection, strategy remains narrative while capital allocation determines the real institution.
A Strategic Capital Capacity Framework
A more complete capital framework should therefore examine at least six dimensions simultaneously.
The first is Capital Adequacy, which determines whether the institution possesses sufficient regulatory and loss-absorbing capacity to remain safe across expected and stressed conditions. The second is Capital Productivity, which asks whether the existing portfolio earns enough after risk and whether incremental RWA creates adequate return.
The third is Capital Generation, which examines the ability of retained earnings and other sources to replenish capacity as the balance sheet grows and shareholders receive distributions. The fourth is Capital Releasability, which considers whether capacity can be recovered through amortisation, asset sales, securitisation, risk transfer or deliberate reduction of activities when better uses emerge.
The fifth is Strategic Optionality, which identifies how much capital remains available to pursue future opportunities or absorb structural change without destabilising the institution. The sixth is Capital Dependency, which asks whether the bank’s preferred architecture relies excessively on external investors, favourable markets, model assumptions or regulatory treatments that could become less accessible.
These dimensions create a more useful concept of capital strength. The strongest capital position is not necessarily the institution reporting the highest CET1 ratio. It is the institution possessing enough capital to remain resilient, enough productivity to compensate shareholders, enough generation to support growth, enough releasability to reallocate resources and enough optionality to respond when the future changes. That is Strategic Capital Capacity.
The CEO Capital Allocation Scorecard
The implications for management are practical. Every material allocation of scarce balance-sheet capacity should answer a set of connected economic questions.
Management needs to know the expected return after funding, operating cost, expected loss and full capital consumption. It needs to understand the amount and duration of RWA committed, including the extent to which the exposure can be reduced or transferred if circumstances change.
The bank should understand what customer position the allocation creates. A loan that generates a broader transaction, deposit or fee relationship deserves different consideration from an economically isolated asset with the same spread.
Management should know whether permanent asset ownership is necessary. If the relationship can be preserved through origination, distribution or risk transfer, the bank should compare those architectures rather than assume the asset belongs permanently on the balance sheet.
The institution should also understand regulatory sensitivity. Activities whose economics depend materially on current risk weights, internal models or capital treatment deserve explicit scenario testing. Finally, every major commitment should include its opportunity cost. Management should know what other growth, acquisition, investment or shareholder use becomes less possible because the capital has been committed here.
This creates a different standard for growth. The question is not whether the bank has enough capital to grow. It is whether the growth deserves the capital.
The Questions at the Top Must Change
The future capital conversation therefore needs to extend beyond solvency and regulatory headroom. Boards should continue asking whether the institution is adequately capitalised, but they should also understand how much of reported headroom is already economically committed to planned growth, shareholder distributions, regulatory change and transformation.
Management should continue monitoring CET1 ratios, but it should also know how much incremental RWA each strategic priority is expected to consume and what returns that capacity is expected to generate. Loan growth should remain a central commercial measure, while leadership increasingly focuses on marginal RAROC and RWA productivity rather than assuming portfolio averages describe future economics.
Capital-light strategies should be considered where they improve return and preserve customer relationships, but management should understand the costs and dependencies embedded in external risk-transfer structures.
Shareholder distributions should remain an important mechanism for returning surplus capital, while boards distinguish genuinely excess capital from Strategic Capital Capacity being preserved for identifiable future options.
Risk-transfer transactions should be assessed not merely by the capital they release, but by the economics of the risk transferred and the quality of the activities into which released capacity will subsequently be redeployed.
Most importantly, capital allocation should become an explicit mechanism for choosing what the bank will become. Every material allocation should answer the same strategic question: does this commitment strengthen the future economic architecture of the institution sufficiently to justify consuming capacity that will no longer be available elsewhere? That is a more useful governing standard than growth for its own sake.
Capital Will Decide What Kind of Bank You Become
Banks cannot pursue every economically plausible future simultaneously. They cannot own every customer relationship, retain every attractive asset, manufacture every product, enter every growing profit pool, make every technology investment, complete every acquisition and still maintain unlimited resilience and shareholder distributions. Something has to allocate scarcity. Capital performs that function.
It converts strategic ambition into institutional commitment because every meaningful business choice eventually requires the bank to decide what it is prepared to fund, own, absorb and place at risk. This makes capital one of the clearest expressions of strategy.
The bank that allocates capital principally towards asset growth is choosing a balance-sheet-intensive future. The bank that redirects capacity towards fee pools, transaction economics and distributed origination is choosing a different architecture. The institution that distinguishes customer ownership from asset ownership creates possibilities that do not exist when both are treated as inseparable.
The bank that actively recycles capital can change its portfolio more quickly than one whose capacity remains permanently locked inside historic businesses. The institution that preserves Strategic Capital Capacity retains the ability to act when opportunities or shocks arrive before they can be incorporated into the next planning cycle.
None of these choices is universally superior. Their value depends on the bank’s funding economics, customer relationships, regulatory environment, risk capability, strategic ambition and Right to Win. What matters is that the choices are deliberate.
The objective is not to maximise CET1, minimise RWA or convert every business into a capital-light model. It is to build an economic architecture in which scarce capital sits where ownership creates the greatest risk-adjusted and strategically durable value while enough capacity remains available for the institution to respond to a changing future.
That is the distinction between capital adequacy and capital strategy. Capital adequacy tells the institution whether it can withstand loss. Capital productivity tells management whether its current commitments are earning enough. Strategic Capital Capacity tells leadership whether the bank still possesses the freedom to become something different.
The central question for the CEO and board therefore becomes more consequential than asking how much capital the institution holds. They need to determine which next unit of growth deserves scarce balance-sheet capacity, what future economic position that commitment is purchasing, and which alternatives the bank is giving up every time it makes that choice.
The answers to those questions will accumulate over years. Eventually, they will describe the bank.
