Capital Adequacy (CAR)

The bank's safety cushion.

Capital adequacy measures a bank's capital against its risk-weighted assets. This is the cushion that absorbs losses before depositors are at risk. Regulators set a minimum; a comfortable buffer above it signals a safer bank. CAR = Bank capital ÷ Risk-weighted assets × 100 Capital Rs 120, risk-weighted assets Rs 1,000. CAR = 12%. Above the minimum A healthy loss-absorbing cushion. Near the minimum Little room for shocks; may need to raise capital. Core safety measure Regulator-standardised Flags fragile banks Risk weights are technical A snapshot only Doesn't capture every risk

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Banks.