BANK 3.2.6 Capital adequacy ratios

(1) A banking business firm's capital adequacy is measured against 3 capital ratios expressed as percentages of its total risk-weighted assets.
(2) A firm's minimum capital adequacy ratios are:
(a) a CET 1 capital ratio of 4.5%;
(b) a tier 1 capital ratio of 6%; and
(c) a regulatory capital ratio of 8%.
Note Under rule 3.3.2, at least 2.5% (by way of a capital conservation buffer) must be held by a banking business firm in addition to the minimum capital adequacy ratios. The firm's CET 1 capital plus capital conservation buffer must therefore be no less than 7% of its total risk-weighted assets.
(3) The Regulatory Authority may, if it believes it is prudent to do so, increase any or all of a firm's minimum capital adequacy ratios. The authority will notify the firm in writing about a new capital adequacy ratio and the timeframe for meeting it.
(4) A firm must maintain at all times capital adequacy ratios higher than the required minimum so that adequate capital is maintained in the context of the firm's risk tolerance, risk profile and capital requirements, and as an additional buffer to absorb losses and problems from market volatility. These higher ratios are the firm's risk-based capital adequacy ratios.
Derived from QFCRA RM/2014-2 (as from 1st January 2015).