The capital adequacy ratio (CAR) is a financial metric used to assess a bank's capital relative to its risk-weighted assets, ensuring that the bank can absorb a reasonable amount of loss and complies with regulatory requirements. This ratio is crucial for evaluating a bank's financial stability and health, as it provides insights into its ability to manage risks and support continued operations during financial downturns. A higher CAR indicates a stronger capital position, while a lower CAR may signal potential vulnerability.
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