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capital adequacy
capital adequacy definition - finance
A
ratio that can indicate a bankÂ’s ability to maintain equity capital sufficient
to pay depositors whenever they demand their money and still have enough funds
to increase the bankÂ’s assets through additional lending. Banks list their
capital adequacy ratios in their financial reports. It is stated in terms of
equity capital as a percent of assets. Capital requirements imposed by
regulators tend to be simple mechanical rules rather than applications of
sophisticated risk models.
Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.
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