Capital adequacy ratio

Capital Adequacy Ratio (CAR) also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk-weighted assets (or credit exposure). National regulators track a bank's CAR and ensure it complies with statutory capital requirements to verify it can absorb a reasonable amount of loss (default of loans) without collapsing. The enforcement of regulated levels of this CAR is intended to protect depositors and promote stability and efficiency of financial systems around the world.