Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

The capital adequacy regulation

This regulation on equity is commonly referred to as the ‘capital adequacy ratio’, the ‘BIS ratio’ or the ‘Cooke ratio’, after the UK’s Peter Cooke, who was the first chairman of the Basel Committee. This regulation, applied since January 1993, states that the capital ratio must exceed 8%. It has had a major impact around the world as the International Monetary Fund (IMF) and the World Bank enforce this ratio in a large number of countries.

BIS rule: (capital/weighted assets) ≥ 8%