Risk weighted assets(given capital adequacy ratio and equity capital)
Formula
CAR
capital adequacy ratios
T1
equity capital or disclosed reserves
T2
undisclosed reserves or general loss reserves or subordinate term debts
Formula description
Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.