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

Minimum capital requirements are regulatory standards set by financial authorities to ensure that banks and financial institutions maintain a certain level of capital reserves to absorb potential losses and reduce the risk of insolvency. These requirements aim to promote stability and confidence in the financial system by ensuring that institutions have enough capital to cover their risk exposures.

minimum capital requirements

Regulatory frameworks are structured systems of rules and guidelines established by authorities to ensure compliance, safety, and fairness in various sectors. They serve to protect public interests, maintain market integrity, and foster sustainable development by setting standards and procedures for businesses and individuals.

regulatory frameworks

Basel III is a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision to strengthen the regulation, supervision, and risk management of banks, particularly in response to the deficiencies in financial regulation revealed by the 2007-2008 financial crisis. It aims to improve the banking sector's ability to absorb shocks arising from financial and economic stress, improve risk management and governance, and strengthen banks' transparency and disclosures.

Relevant Degrees

Your Lessons