understanding financial jargon
Firms such as banks working in the financial sector have capital requirements imposed upon them by the Regulator, to ensure they remain solvent. One way of measuring the likelihood of insolvency of a bank is to look at it's capital ratio. This is the ratio of it's Tier one capital divided by it's risk weighted capital assets. The risk weighted assets of a bank are the total assets under risk (such as mortgages and loans) weighted by the likelihood of non-repayment. So if for example a bank has a mortgage book of £100 million, but risk weighted at 75% the risk weighted asset value is £75 million. If the Tier one capital is £25 million, then the capital ratio is 25/75 or 33%.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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