Recently, the Basel Committee on Banking Supervision has revised the capital adequacy regulation. Known as Basel II, it is discussed in Stage 8.
Banks must obey the Basel Committee’s regulation on bank capital, which calls for an 8% capital requirement on risk-adjusted assets.
|BIS ratio||= capital adequacy ratio = Cooke ratio|
| ||= (capital/weighted asset) ≥ 8%|
The capital (defined by the BIS) consists of two parts: Tier 1 (core capital) and Tier 2 (supplementary capital).
Risk adjustment factors applying to positions (on- and off-balance sheet) range from 0% to 100%.