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What is Risk-Weighted Assets?

    IndianMoney.com Research Team | Sunday, April 12,2009, 10:17 AM
 

A bank's assets weighted according to credit risk, some assets, like debentures, are assigned a higher risk than others, such as cash. This type of asset calculation is used in determining the capital requirement for a financial institution, and is regulated by the Federal Reserve Board. In terms of the smallest amount of capital that is required within banks and other institutions, based on a percentage of the assets, weighted by risk.

Assets which are weighted for credit risk according to a formula used by the Reserve Bank. On and off-balance-sheet items are weighted for risk, with off-balance-sheet items converted to balance-sheet equivalents before being allocated a risk weight. Risk weights are in five categories, from zero to 100 per cent, those carrying a zero weight include notes and coins, gold matched by gold liabilities, balances with the Reserve Bank.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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