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   Capital Adequacy
   















 

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Capital Adequacy

A risk management concept which requires that the capital of a financial organization be sufficient to protect its counterparties and depositors from on- and off-balance sheet market risks, credit risk, etc. Capital requirements tend to be simple mechanical rules rather than applications of sophisticated risk management technology.

For a full discussion on how regulators calculate capital requirements, see "Key Risk Concepts: Capital Adequacy."

Glossary * C