CAR

CAR, or Capital Adequacy Ratio, is a measurement used to ensure banks have enough capital to cover their risks. It compares a bank's core capital (funds invested by owners and retained earnings) to its risk-weighted assets (loans and other assets adjusted for risk). A higher CAR indicates a bank is better prepared to withstand financial stress or losses, promoting stability in the banking system. Regulators often set minimum CAR levels to protect depositors and maintain confidence in financial institutions.