Written by:
PK

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.

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.

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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PK

PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK is in his mid-30s and works and lives in the Bay Area with his wife, two kids, and dog.