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.

Capital Adequacy Ratio (CAR)


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.


Investment dictionary. . 2012.

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