Question
Consider the following statements regarding
“Capital Adequacy Ratio (CAR)”: I. CAR is a measure of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. II. It is also known as Capital-to-Risk Weighted Assets Ratio. III. It assesses the ability of banks to absorb losses. Which of the statements given above is/are correct?Solution
CAR is a measure of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. The Capital Adequacy Ratio, also known as capital-to-risk weighted assets ratio (CRAR), is used to protect depositors and promote the stability and efficiency of financial systems around the world. CAR is the measurement ratio that assesses the ability of banks to absorb losses.
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