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Risk-Weighted Assets |
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Risk-Weighted Assets The reserve requirements for a bank, weighted according to risk. Risk-weighted assets are the capital a bank must keep to cover its liabilities. They are calculated as follows: Government bonds have a risk weight of 0% while all other assets have a risk weight of 100%. One calculates the units of each type of asset a bank carries to find how risky its assets are. Risk-Weighted Assets What Does Risk-Weighted Assets Mean? The minimum amount of capital that is required within banks and other institutions, based on a percentage of the assets, weighted by risk. Investopedia explains Risk-Weighted Assets The idea behind risk-weighted assets is to move away from having a static requirement for capital. Instead, it is based on the riskiness of a bank's assets. For example, loans that are secured by a letter of credit are considered riskier than a mortgage loan that is secured with collateral. Related Terms: Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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