Capital Adequacy Ratio - CAR
- Capital Adequacy Ratio - CAR
- A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
Also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
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.
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Capital adequacy ratio — (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank s capital to its risk. National regulators track a bank s CAR to ensure that it can absorb a reasonable amount of loss [Cite web |… … Wikipedia
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