Basic Accounting Knowledge: Capital Adequacy Ratio

Capital adequacy ratio, also known as capital adequacy ratio, is to ensure normal banking institutions and other financial institutions.

According to the Basel agreement, our country stipulates that the capital adequacy ratio index that commercial banks must achieve is that the ratio of total capital including core capital and subsidiary capital to the total amount of risk weighted assets should not be less than 8%, of which the ratio of core capital to total assets of risk weighted assets is not less than 4%.

Core capital includes paid in capital, capital reserves, surplus reserves and undistributed profits. Subsidiary capital includes loan bad debt preparation, bad debt preparation, investment risk preparation and so on.