Bank Of Baku

Capital adequacy ratio drops in Azerbaijan’s banking system

Capital adequacy ratio drops in Azerbaijan’s banking system
# 31 October 2008 14:24 (UTC +04:00)
Baku. Vahab Rzayev – APA-Economics. As of October, 1 Azerbaijan-based banks’ capital adequacy ratio was 17.7%, down 2 percentage points on a year ago, said the National Bank of Azerbaijan.
The capital adequacy is the percentage of a bank’s total capital to its risk-weighted assets. The capital adequacy shows general credibility of a bank.
100% safest assets are not calculated in the ratio under the instructions specified by the Basel committee of the Bank for International Settlements.
Although capital adequacy requirements have existed for a long time, the Basel committee specified the requirements.
Each class of asset has a weight of between zero and 1 (or 100%). Very safe assets such as government debt have a zero weighting, high risk assets (such as unsecured loans) have a rating of one. Other assets have weightings somewhere in between. The weighted value of an asset is its value multiplied by the weight for that type of asset.
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