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Basel

Capital adequacy ratios (CAR) assess risk by comparing a bank's capital to its assets. Regulators use the CAR, which is the ratio of a bank's capital to its risk weighted assets, to determine if banks have sufficient capital. The CAR is calculated by dividing the total of Tier I and Tier II capital by total risk weighted assets.

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37 views1 page

Basel

Capital adequacy ratios (CAR) assess risk by comparing a bank's capital to its assets. Regulators use the CAR, which is the ratio of a bank's capital to its risk weighted assets, to determine if banks have sufficient capital. The CAR is calculated by dividing the total of Tier I and Tier II capital by total risk weighted assets.

Uploaded by

Ajaya Dhakal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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What is CAR?

Capital adequacy provides regulators with a means of


establishing whether banks and other financial
institutions have sufficient capital to keep them out of
difficulty. Regulators use a Capital Adequacy Ratio
(CAR), a ratio of a banks capital to its assets, to assess
risk.
CAR = (Banks Capital)/(Risk Weighted Assets)
= (Tier I Capital + Tier II Capital)/(Risk Weighted
Assets)

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