Which of the following does not Affect Credit Creation of Commercial Bank.
Capital Adequacy Ratio
Capital Adequacy Ratio does not affect credit creation of Commercial bank. Capital adequacy ratios are a measure of the amount of a bank’s capital expressed as a percentage of its risk-weighted credit exposures.
Capital Adequacy Ratio = (Tier l capital + Tier ll capital ) / Risk-weighted assets
The minimum capital adequacy ratio that apply are:
- tier one capital to total risk weighted credit exposures to be not less than 4 percent;
- total capital (tier one plus tier two less certain deductions) to total risk weighted credit exposures to be not less than 8 percent