What is Capital adequacy ratio?
Also known as: CAR
The ratio of a bank's own capital to its risk-weighted assets. This indicator shows whether the bank can absorb unexpected losses from its own capital without touching depositors' money. Formula: capital ÷ risk-weighted assets × 100%. "Risk-weighted" means that each asset is taken not at its balance sheet value but multiplied by a risk weight: a low-risk asset (for example, a government security) is counted with a low weight, while an unsecured loan is counted with a high weight. The concept is based on the international approach developed by the Basel Committee on Banking Supervision. The minimum requirement and the risk weights are set by each country's central bank; for Uzbekistan, check the exact standards in the Central Bank's current regulation.