Calculate capital adequacy ratio (CAR or CRAR) from total capital or Tier 1 + Tier 2 capital and risk-weighted assets, or solve for capital or RWA.

CAR = (Tier 1 + Tier 2 capital) ÷ risk-weighted assets × 100.

Use the same currency and scale (e.g. millions) as the capital figure.

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Related Calculators

Capital Adequacy Ratio Formula

The capital adequacy ratio compares a bank's capital with its risk-weighted assets. It is usually shown as a percentage.

CAR = (TC / RWA) × 100
  • CAR = Capital Adequacy Ratio, expressed as a percentage
  • TC = Total Capital
  • RWA = Risk-Weighted Assets

If you know the capital adequacy ratio and risk-weighted assets, the calculator can solve for total capital:

TC = (CAR / 100) × RWA

If you know total capital and the capital adequacy ratio, the calculator can solve for risk-weighted assets:

RWA = TC / (CAR / 100)

Choose what to solve for, then enter the other two values. To find the capital adequacy ratio, enter total capital (or Tier 1 and Tier 2 capital) and risk-weighted assets. To find total capital, enter the ratio and risk-weighted assets. To find risk-weighted assets, enter total capital and the ratio.

Capital Adequacy Ratio Reference Ranges

The table below gives a general way to interpret a capital adequacy ratio. Actual regulatory requirements can vary by jurisdiction, institution type, and capital category.

Capital Adequacy Ratio General Interpretation
Below 8% May indicate insufficient capital under many common regulatory frameworks.
8% to 10% Often considered a minimum or near-minimum capital range.
10% to 15% Generally indicates a stronger capital position.
Above 15% May indicate a high capital buffer, depending on the bank's risk profile.

Example Calculations

Example 1: Calculate capital adequacy ratio

Suppose a bank has total capital of 50,000,000 and risk-weighted assets of 400,000,000.

CAR = (50,000,000 / 400,000,000) × 100
CAR = 12.50%

The capital adequacy ratio is 12.50%.

Example 2: Calculate required total capital

Suppose the target capital adequacy ratio is 10% and risk-weighted assets are 250,000,000.

TC = (10 / 100) × 250,000,000
TC = 25,000,000

The required total capital is 25,000,000.

FAQ

What does capital adequacy ratio mean?

The capital adequacy ratio measures how much capital a bank has compared with its risk-weighted assets. A higher ratio generally means the bank has a larger capital cushion against potential losses.

What are risk-weighted assets?

Risk-weighted assets are assets adjusted for risk. For example, a low-risk asset may receive a lower weight, while a higher-risk loan may receive a higher weight. The purpose is to compare capital against the amount of risk the bank is carrying, not just the total size of its balance sheet.

Why is the ratio multiplied by 100?

The formula is multiplied by 100 so the result is shown as a percentage. For example, a ratio of 0.125 becomes 12.5%.