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Finance & Banking vocabulary · Regulation & Compliance

Capital adequacy ratio

Meaning in finance & banking, with examples

nounCommon term

In finance & banking, capital adequacy ratio means: A bank's capital divided by its risk-weighted assets. It shows whether the bank has enough capital to absorb losses; Basel rules require at least 8% before extra buffers.

In Turkish: sermaye yeterlilik oranı, SYO

How it is used

Often shortened to CAR and closely linked to 'capital ratio' and 'CET1 ratio'. Banks report it every quarter, and regulators set minimum levels and buffers. A falling ratio may force a bank to raise capital or slow its lending.

Example sentences

  1. The bank's capital adequacy ratio fell to 14 percent after strong loan growth.

  2. Issuing subordinated debt would improve our capital adequacy ratio.

Common collocations

  • minimum capital adequacy ratio
  • risk-weighted assets
  • CET1 ratio
  • capital buffer
  • capitalMoney and other financial resources used to start and run a business; for banks, the owners' funds that absorb losses and protect depositors.
  • Basel IIIA set of international banking rules agreed by the Basel Committee after the 2008 global financial crisis. It requires more and better capital and adds liquidity and leverage limits.
  • regulatorA public body that makes and enforces the rules for an industry. Banking regulators license banks, set capital rules and inspect banks.
  • stress testAn analysis that checks whether a bank would have enough capital and liquidity to survive a severe but possible shock, such as a deep recession.

More terms: Regulation & Compliance

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This page explains English vocabulary for learners. It is not financial advice.