The Capital Adequacy Ratio (CAR) is a critical financial metric used to determine a bank's capital strength and its ability to withstand potential losses, ensuring the protection of depositors and maintaining financial system stability. It is calculated by dividing a bank's capital by its risk-weighted assets, with regulatory authorities setting minimum CAR requirements to promote prudent risk management and financial resilience.

Capital Adequacy Ratio

financial metric

bank's capital strength

potential losses

protection of depositors

financial system stability

Risk-Weighted Assets (RWA) are a bank's assets or off-balance-sheet exposures, weighted according to risk, which are used to determine a bank's minimum capital requirements under regulatory frameworks like Basel III. This ensures that banks hold capital proportional to the riskiness of their assets, promoting stability in the financial system.

risk-weighted assets

regulatory authorities

minimum CAR requirements

prudent risk management

Financial resilience refers to the ability of individuals, households, or organizations to withstand and recover from financial shocks, such as sudden income loss or unexpected expenses. It involves a combination of financial literacy, savings, diversified income sources, and access to financial resources or support systems.

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