Risk-Weighted Assets

AAA

DEFINITION of 'Risk-Weighted Assets'

In terms of the minimum amount of capital that is required within banks and other institutions, based on a percentage of the assets, weighted by risk.

INVESTOPEDIA EXPLAINS 'Risk-Weighted Assets'

The idea of risk-weighted assets is a move away from having a static requirement for capital. Instead, it is based on the riskiness of a bank's assets. For example, loans that are secured by a letter of credit would be weighted riskier than a mortgage loan that is secured with collateral.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Capital Purchase Program - CPP

    A program sponsored by the U.S. Treasury designed to provide ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  6. Risk Management

    The process of identification, analysis and either acceptance ...
Related Articles
  1. How Risky Is Your Portfolio?
    Personal Finance

    How Risky Is Your Portfolio?

  2. Operating Leverage Captures Relationships
    Investing

    Operating Leverage Captures Relationships

  3. How Basel 1 Affected Banks
    Personal Finance

    How Basel 1 Affected Banks

  4. Risk And Diversification
    Retirement

    Risk And Diversification

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center