Capital Adequacy Ratio

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Capital Adequacy Ratio

A measure of a bank's ability to meet its obligations relative to its exposure to risk. The capital adequacy ratio exists to ensure that a bank is able to handle losses and fulfill its obligations to account holders without ceasing operations. It is calculated as:

CAR = ( Tier 1 Capital + Tier 2 Capital ) / Risk-weighted assets.
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Fitch Ratings, South and South East Asia has stated that the capital adequacy ratios in the Sri Lankan banking sector are worse than is shown by the figures.
UAE banks have sought to strengthen their capital adequacy ratios following new rules issued by the country's Central Bank.
Their capital adequacy ratios stand above 10 percent and far exceed the 8 percent threshold for internationally active banks.
Various degrees of risk weighting were set in 1988 by the Basel-based Bank for International Settlements (BIS) to help banks compute their capital adequacy ratios and limit excessive exposure to risky assets.
The rating downgrades reflect Penn Treaty Network America's declining capital adequacy ratios in the past two years, its ongoing capital needs associated with aggressive growth that the company needs to address in a consistent fashion, and Standard & Poor's increased discomfort with potential volatility in the claims reserves of the long-term care insurance industry.
In line with the Basel III regime, China has recently released draft regulations requiring the country's key banks to have capital adequacy ratios of 11.
The central bank bought these shares from the commercial banks from November 2002 to September 2003 to prevent then flagging share prices from eating into these banks' capital adequacy ratios.
Such moves will have only a limited impact on the banks' capital adequacy ratios,'' Mori told a news conference.
Zuk, SCPIE President and Chief Executive Officer, said, "As we stated before, SCPIE's decision to divest its assumed reinsurance business through a series of reinsurance transactions is part of an overall plan to improve the company's capital adequacy ratios.
Romania-based BCR may need to raise fresh capital in order to comply with capital adequacy ratios, according to ratings agency Fitch Ratings.
Japan's seven major banking groups said Wednesday their group capital adequacy ratios rose during the 12 months of fiscal 2003 to between 7% and 13% on a preliminary basis.
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