risk-based capital ratio

Dictionary of Finance and Investment Terms for: risk-based capital ratio
risk-based capital ratio

firrea-imposed requirement that banks maintain a minimum ratio of estimated total capital to estimated risk-weighted assets.

Dictionary of Insurance Terms for: risk-based capital ratio
risk-based capital ratio

measurement of the amount of capital (assets minus liabilities) an insurance company has as a basis of support for the degree of risk associated with its company operations and investments. This ratio identifies the companies that are inadequately capitalized by dividing the company’s capital by the minimum amount of capital that the regulatory authorities feel is necessary to support the insurance operations. A ratio of 1.00 or greater is deemed to be satisfactory. This standard can be used to identify inadequately capitalized life and health companies, thereby enabling regulatory authorities to intervene before a company becomes insolvent.

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