meaning of Capital Adequacy

Capital Adequacy meaning in Finance Dictionary

A measure for the monetary power of a bank or securities company, frequently expressed as a ratio of their money to its possessions. For banking institutions, there clearly was today an international money adequacy standard, used by the Basel Committee regarding the Bank for Global Settlements. The Basel Capital Accord, introduced from 1988, calls for finance companies to possess capital add up to at the least 8 % of their possessions. In 2004, a revised framework, known as Basel II, ended up being granted. Among its proposals are that money demands ought to be even more threat painful and sensitive and that better usage should always be made from threat assessments from banks' inner systems. The revisions, which have sparked controversy, are increasingly being considered by nationwide banking supervisors and implementation arrives at the conclusion of 2007.

Capital Adequacy meaning in Law Dictionary

the main city requirement is a bank legislation, which sets a framework on what banking institutions and depository institutions must manage their money. The categorization of assets and money is very standardised so that it is danger weighted (see Risk-weighted asset).

Capital Adequacy meaning in Business Dictionary

Percentage proportion of a financial institution's primary money to its possessions (loans and investments), used as a measure of its economic power and stability. In line with the Capital Adequacy traditional set by Bank for International Settlements (BIS), finance companies must-have a primary money base equal at the least to eight percent of these possessions: a bank that lends 12 bucks for every single buck of its money is within the recommended limitations.

Capital Adequacy meaning in Insurance Dictionary

is the investment required of a risk financing vehicle, like a captive insurance carrier, to satisfy the liabilities guaranteed. Pertaining to enterprise danger management (ERM), the definition of refers to the quantity of money necessary to fulfill a certain economic money constraint (age.g., a particular probability of damage), frequently calculated at the enterprise level.