DEFINITION of 'Capital Adequacy Ratio  CAR'
A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
Also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
INVESTOPEDIA EXPLAINS 'Capital Adequacy Ratio  CAR'
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a windingup and so provides a lesser degree of protection to depositors.
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RELATED FAQS

What does it mean when a company has a high capital adequacy ratio?
The capital adequacy ratio, also known as capital to riskweighted assets ratio, measures a bank's financial strength by ... Read Full Answer >> 
What is the difference between the capital adequacy ratio vs. the solvency ratio?
Both the capital adequacy ratio and the solvency ratio provide ways to evaluate a company's debt versus its revenues situation. ... Read Full Answer >>
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