Advanced Search

Guidance Notes on Risk Weighted Capital Adequacy Ratio

The Basel Capital Accord, or the agreed framework on international convergence of capital measurement and capital standards of the Committee on Banking Regulations and Supervisory Practices (Basel Committee), is based on a concept of weighting both onbalance sheet assets and off-balance sheet exposures according to their perceived level of risk. The sum of risk weighted assets and risk assessed off-balance sheet exposures is related to a bank's capital base and the resulting "risk asset ratio" is used as a measure of capital adequacy. The broad details of the capital framework which is to be implemented are indicated in the Guideline.