How is capital adequacy measured?

Capital adequacy ratio is measured by dividing a bank’s capital by its risk-weighted assets. It is the ratio of a bank’s capital to its risk-weighted assets and current liabilities. This ratio is utilized to secure depositors and boost the efficiency and stability of financial systems all over the world. You can read about the Capital Adequacy Ratio (CAR) in the given link.

Further readings:

  1. Topic-Wise GS 3 Questions for UPSC Mains
  2. Basel III Norms – Regulations by Basel Committee on Banking Supervision

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