Risk Management and Compliance

Capital adequacy

Capital adequacy is a critical subject in finance that focuses on the sufficient capital banks and financial institutions must hold to safeguard against a wide range of risks. This area of study examines the regulatory frameworks and standards, such as those established by the Basel Accords, which dictate the minimum capital requirements to ensure stability and promote confidence in the financial system. Students learn about risk-weighted assets, Tier 1 and Tier 2 capital, and the capital conservation buffer. The subject also delves into the calculation methods for different types of risks including credit, market, and operational risks. Understanding capital adequacy is essential for managing financial risks and maintaining the integrity of financial institutions.