Basic Accounting Knowledge: Capital Adequacy Ratio

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Capital adequacy ratio, also known as capital adequacy ratio, is to ensure normal banking institutions and other financial institutions.

Operate

Necessary for development

capital

Ratio.

Financial management authorities in various countries generally have control over the capital adequacy ratio of commercial banks, with the purpose of monitoring the ability of banks to resist risks.

Capital adequacy ratio has different caliber. The main ratios include capital to deposit ratio, capital to debt ratio, capital to total assets ratio, and capital to risky assets ratio.

According to the Basel agreement, our country stipulates that the capital adequacy ratio index that commercial banks must achieve is that the ratio of total capital including core capital and subsidiary capital to the total amount of risk weighted assets should not be less than 8%, of which the ratio of core capital to total assets of risk weighted assets is not less than 4%.

Core capital includes paid in capital, capital reserves, surplus reserves and undistributed profits. Subsidiary capital includes loan bad debt preparation, bad debt preparation, investment risk preparation and so on.

five years

Longer term bonds.