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)." Investopedia Says:
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. Related Terms:
Basel Accord
Capital
Capital Requirement
General Provisions
Tier 1 Capital
Tier 2 Capital |