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    Question

    _______ measures banking sector’s ability to absorb

    shock arising from financial and economic stress.
    A Capital adequacy ratio Correct Answer Incorrect Answer
    B Liquidity Coverage Ratio Correct Answer Incorrect Answer
    C Net stable funding Ratio Correct Answer Incorrect Answer
    D Leverage Ratio Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Capital Adequacy Ratio (CAR) is also known as Capital to Risk Assets Ratio (CRAR), is the ratio of a bank's capital to its risk. It is therefore indicative of the capital available with the bank to absorb any losses arising due to any financial or economic risk. It is calculated as the total capital of the bank (tier I + Tier II) divided by the risk weighted assets of the bank.

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