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.
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IT added: "We expect the bank's TCE to improve by e1/4100 mln, increasing our adjusted ratio of TCE to risk-weighted assets by around 60 basis points to 11.2% from 10.6% as of September 2018.
When cocos with a low CET1 trigger, such as 5 percent of risk-weighted assets, are activated, the issuing bank is likely to be close to the point of non-viability where the relevant national authority would be called upon to resolve the institution.
For instance, we have prescribed minimum regulatory capital for banks at 12 per cent of risk-weighted assets, much higher than that prescribed by the Basel norms.
The BSP said risk-weighted assets of universal and commercial banks had a collective value of P4.96 trillion as of the end of September last year.
Capital is calculated in terms of risk-weighted assets. With this method, banks have too much discretion to define risks, which undermines the credibility of core capital.
Collective provision of Dh2.149 billion has been maintained in excess of 1.4 per cent of the credit risk-weighted assets, which is in line with Central Bank's requirement for banks to have a collective provision of 1.5 per cent of credit risk-weighted assets by the end of 2014.
It added: "Our collective provision of Dh2,062 million is 1.39 per cent of the credit risk-weighted assets, in line with Central Bank's requirement for banks to have a collective provision of 1.5 per cent of credit risk-weighted assets by the end of 2014."
Besides, the transaction will free up capital of some EUR 400 million, primarily by reducing risk-weighted assets by EUR 4.2 billion, which will boost KBC's tier-1 ratio by about 0.4%.
During the first quarter, risk-weighted assets have declined by EUR18bn to EUR328bn as of March 31, driven by currency effects as well as changes to credit risks, the bank said.
The bank saw its total risk-weighted assets fall to EUR 119.8 billion from EUR 123.9 billion, due among others to a stagnation in loan volumes.
The minimum capital requirement reflected a percentage of risk-weighted assets of the bank.
Despite a 17.4 trillion won (2.2 percent) increase in risk-weighted assets during the first quarter, the highest BIS capital ratio attributed to a 3.7 trillion won (3.6 percent) rise in bank capital backed by 3.9 trillion won of net income realized during the period.