A capital requirement is the amount of shareholders' money that a regulator requires a financial firm to hold, and it is described in full under minimum capital requirement. The requirement exists so that losses fall first on the owners, not on depositors, customers or the public purse, and so that a firm has resources to continue operating or wind down in an orderly way.
The general term covers two related ideas. The first is initial capital: a fixed sum that an applicant must have paid in before a license is granted, such as the amounts set for banks, payment institutions and electronic money institutions. The second is an ongoing requirement that rises with the size and risk of the business. For banks this is expressed as ratios of capital to risk-weighted assets under Basel III; for European payment firms it is an own funds calculation based on overheads or payment volume.
Not every regime uses capital in this strict sense. United States money transmitter laws rely on a minimum net worth together with a surety bond and rules on permissible investments. A capital requirement is also distinct from a reserve or safeguarding requirement, which concerns assets held to cover what a firm owes its customers.