Capital adequacy

1. Bank regulation - capital requirements.

Capital adequacy is the system of regulating banks (and other financial institutions) by requiring them to maintain minimum acceptable levels - and types - of capital, adequate to absorb their potential credit losses and other trading losses.

2. BIS - capital requirements.

The term 'capital adequacy' also refers to the prevailing minimum amount of risk weighted capital that banks are required to maintain in proportion to the risk assets that they assume, normally used in connection with the requirements laid down internationally by the Bank for International Settlements (BIS) and monitored by domestic central banks.

Historically, the BIS capital adequacy standard was 8%.

Under the Basel III framework this standard is increased (strengthened) substantially - very roughly doubled - and its measurement is refined.

See also

• Bank for International Settlements
• Basel II
• Basel 2.5
• Basel III
• Capital Adequacy Directive
• Capital Requirements Directive
• Common equity
• Countercyclical buffer
• Economic capital
• IRB
• IRRBB
• GCLAC
• ICAAP
• Microprudential
• Pillar 1
• Pillar 2
• Pillar 3
• Primary Loss Absorbing Capital
• Regulatory capital
• Reserve requirements
• RWAs
• Settlement risk
• Slotting