On this page is a bank capital adequacy ratio calculator. Enter the bank's reported Tier 1 and Tier 2 Capital and Risk-Weighted Assets to compute the Capital Adequecy Ratio.
Capital Adequacy Ratio Calculator
What is the Capital Adequacy ratio?
A bank's capital adequacy ratio compares the proportion of its high quality liquid assets and other high-quality, yet not comparable assets to its total risk-weighted assets. The capital adequacy ratio and the capital types are defined by Basel III:
All of the measures that came out of Basel III aim to prevent another banking crisis of the form of the Great Financial Crisis in 2008-2009. The Capital Adequacy ratio was one of the ratios that came out of the global agreement, and it comes with a minimum (which has been ratcheted up a few times).
The Tier 1 Leverage Ratio calculator and Common Equity Tier 1 Capital Ratio calculator deal with only the highest quality assets, defined by Basel III.
Capital Adequacy Leverage Ratio Formula
The capital adequacy ratio formula is:
Capital\ Adequacy\ Ratio=\frac{Tier\ 1\ Capital+Tier\ 2\ Capital}{Risk-Weighted\ Assets}Where:
- Tier 1 Capital – Very high quality liquid assets, as defined by Basel III.
- Tier 2 Capital – High quality assets, as defined by Basel III.
- Risk-weighted Assets – Risk-weighted assets reported by a bank.
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