The Total Capital Ratio measures the proportion of a bank's total regulatory capital to its Risk-Weighted Assets (RWA). It is a key indicator of financial stability and a bank’s ability to meet regulatory requirements. Regulatory capital includes both Tier 1 (core capital) and Tier 2 (supplementary capital). A higher Total Capital Ratio reflects a stronger capital position, capable of absorbing losses more effectively.
Under the Standardised Credit Risk Approach (SCRA) as defined by CRR III, the Total Capital Ratio is critical for compliance with updated capital requirements effective January 1, 2025. ESG risks are increasingly incorporated into these calculations, such as the potential effects of climate risks on asset valuations and capital reserves. FinAPU provides comprehensive tools to monitor the Total Capital Ratio in real time, integrate ESG factors, and develop risk mitigation strategies.
