FRM Glossary · Part I · Foundations

Capital Adequacy Ratio (CAR)

Total regulatory capital divided by risk-weighted assets — the primary solvency metric for banks.

In more detail

CAR = (CET1 + AT1 + Tier 2) / RWA. Basel III requires a minimum CAR of 8%, with additional buffers (capital conservation, G-SIB, countercyclical) pushing the effective minimum well above 10% for the largest banks. CET1 must be at least 4.5% of RWA.