Capital adequacy

Capital adequacy,

Definition of Capital adequacy:

  1. Percentage ratio of a financial institutions primary capital to its assets (loans and investments), used as a measure of its financial strength and stability. According to the Capital Adequacy Standard set by Bank for International Settlements (BIS), banks must have a primary capital base equal at least to eight percent of their assets: a bank that lends 12 dollars for every dollar of its capital is within the prescribed limits.

Meaning of Capital adequacy & Capital adequacy Definition