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In Spotlight
The Capital Adequacy Ratio (CAR) is a financial metric used to determine the stability and financial health of a bank. It is calculated by dividing the bank’s capital (both Tier 1 and Tier 2) by its risk-weighted assets. CAR ensures that a bank has enough capital to absorb potential losses and meet its obligations, thus minimising the risk of insolvency.The formula is:CAR = (Tier 1 Capital + Tier 2 Capital) / Risk-Weighted Assets
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