With the smaller banks' higher exposure only partially covered by higher capital

[Eartha]

Dear all,

How should I understand the underlined? Why "that is a source of concern"?

Thanks in advance.

Eartha

In contrast, smaller commercial banks have a much higher level of exposure. Bank of Nanjing and China Everbright Bank -- which in June delayed its Hong Kong IPO -- both have 20% of their loan book with local government financing vehicles. With the smaller banks' higher exposure only partially covered by higher capital, that is a source of concern.

[Hedwig]

Dear all,

How should I understand the underlined? Why "that is a source of concern"?

Thanks in advance.

Eartha

In contrast, smaller commercial banks have a much higher level of exposure. Bank of Nanjing and China Everbright Bank -- which in June delayed its Hong Kong IPO -- both have 20% of their loan book with local government financing vehicles. With the smaller banks' higher exposure only partially covered by higher capital, that is a source of concern.

Hmm, I must first point out that I'm neither a teacher, nor a native speaker, and that I know nothing about banking and just the words 'bank' or 'finance' make me dizzy.

That being said, my best guess is that the author means smaller banks are more vulnerable, because they haven't got much capital to face the risks.