|
Capital Adequacy Ratio (CAR)
What does it mean?
A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
In Other Words...
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
Related Links
Capital Adequacy of Financial Intermediaries - A good tutorial on how to calculate CAR.
Capital adequacy ratios for banks - A simplified explanation and example of calculation.
Related Terms
Capital | Tier 1 Capital | Tier 2 Capital
1 |
A | B |
C | D |
E | F |
G | H |
I | J |
K | L |
M | N |
O | P |
Q | R |
S | T |
U | V |
W | X |
Y | Z
|
