what s the purpose of the capital adequacy ratio 
the capital adequacy ratio is intended to ensure that banks have enough funds available to handle a reasonable amount of losses and prevent insolvency the bottom linecar or the capital adequacy ratio is a comparison of the available capital that a bank has on hand to its risk weighted assets the ratio provides a quick idea of whether a bank has enough funds to cover losses and remain solvent under difficult financial circumstances car minimums are 8 0 under basel ii and 10 5 with an added 2 5 conservation buffer under basel iii the higher the car the better able a bank should be to meet its financial obligations when under stress 