DQYDJ Logo

Capital Adequacy Ratio Calculator

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.

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:

Basel III asset quality tiers
Asset quality tiers (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.

Other Banking Ratio and Valuation Calculators

Next, try these other DQYDJ tools to value banks:

      

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.

Don't Quit Your Day Job...

DQYDJ may be compensated by our partners if you make purchases through links. See our disclosures page. As an Amazon Associate we earn from qualifying purchases.
Sign Up For Emails
© 2009-2022 dqydj.com
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram