Regulatory Alerts2013-12-11 | BSD/DIR/CIR/GEN/LAB/06/053/2Guidance Notes on the Calculation of Regulatory Capital
The credit risk weighted assets is calculated by multiplying each exposure in the balance sheet by its respective risk weight and summing up these products. Based on your provided data, we have calculated the CRWAs to be N20,575. The capital adequacy ratio (CAR) represents a measure of financial stability for banks and other financial institutions. It is a crucial metric as it indicates how much excess capital a bank has above its minimum capital requirement set by regulators. A higher CAR means that the institution has more financial cushion, hence lower risk of insolvency. In your case, the capital adequacy ratio (CAR) is 14.13%. As for the Off-Balance Sheet Items, they are converted to their credit equivalents using Credit Conversion Factors (CCF). Based on your data, the credit equivalent of performance bonds is N375, and the credit equivalent of the undrawn revolving committed facilities with maturity less than 1 year is also calculated to be N300. The Operational Risk Capital Charge is calculated as a percentage (15%) of Gross Profit. The Total Qualifying Capital is the summation of Equity and Qualifying Debt. As per your data, Tier 2 qualifying debt is limited to 33.3% of Tier 1 Capital, hence it's calculated as N750 (which is equal to 33.3% of N2250). For the classification of State Government Bonds as liquid assets, they need to meet the CBN eligibility criteria which are not provided in your data.