Capital Adequacy

Business, Legal & Accounting Glossary

Definition: Capital Adequacy


Quick Summary of Capital Adequacy


A measure of the financial strength of a bank or securities firm, usually expressed as a ratio of its capital to its assets.

For banks, there is now a worldwide capital adequacy standard, drawn up by the Basel Committee of the Bank for International Settlements. The Basel Capital Accord, introduced from 1988, requires banks to have capital equal to a minimum of 8 per cent of their assets.

In 2004, a revised framework, known as Basel II, was issued. Among its proposals are that capital requirements should be more risk sensitive and that greater use should be made of risk assessments produced by banks internal systems.

The revisions, which have sparked controversy, are being considered by national banking supervisors and implementation and were passed at the end of 2007.



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Definition Sources


Definitions for Capital Adequacy are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 0 Views.