What is Capital Adequacy Ratio for banks?

By Research Desk
about 3 years ago

Capital Adequacy Ratio (CAR), also known as Capital to Risk Weighted Assets Ratio (CRAR), is the measure of a bank's capital and is expressed as a percentage of a bank's risk weighted credit exposures.

 

CAR = Total Capital / Total Risk weighted assets

 

Total capital comprises of the bank’s Tier I and Tier II capital

Total risk weighted assets takes into account credit risk, market risk and operational risk.

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