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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We could affirm the ratings if we see that the bank receives sufficient capital support, restoring capital adequacy ratios to substantially above the minimum required levels, and if the risks of noncompliance with regulatory requirements subside, while the bank's liquidity position remains stable," said the report.
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.
The authorities will also examine the financial soundness and capital adequacy ratios of 85 savings banks, and announce appropriate measures based on the assessments by the end of September.
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.
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.
The capital adequacy ratios of Korea Exchange Bank and Chohung Bank which had been below 10 percent, improved during the first half of the year.
Such moves will have only a limited impact on the banks' capital adequacy ratios,'' Mori told a news conference.
Capital adequacy ratios are robust but in line with BMI's nature of operations.
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