Risk-Based Capital Standards

Risk-Based Capital Standards are regulatory requirements that determine the minimum amount of capital (financial reserves) a bank or insurance company must hold to cover potential losses. These standards assess the risk level of the institution's assets and activities, ensuring that they have enough safety margin to withstand financial stress or unexpected losses. By adjusting the required capital based on the riskiness of investments or loans, these standards promote stability and protect policyholders, depositors, or investors, fostering a healthier financial system.