FRM Glossary · Part I · Foundations

Risk-Weighted Assets (RWA)

The risk-adjusted asset base against which a bank's minimum capital ratio is calculated — total RWA × 8% = minimum CET1.

In more detail

Under Basel III, RWA = credit RWA + market RWA + operational RWA. Each exposure is multiplied by a risk weight reflecting its risk: sovereigns 0%, mortgages 35–50%, corporate 100%, subordinated debt 150%. The denominator in the CAR / CET1 ratio is RWA — so reducing RWA (e.g. via netting or credit-quality migration) frees capital.