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Home / Financial Tools / Basel III Capital Adequacy & Risk-Weighted Assets Calculator

Graduate-Level Modeling · Bank Regulatory Capital

Basel III Capital Adequacy & Risk-Weighted Assets Calculator

A bank's balance sheet size tells you almost nothing about its safety. What matters is capital measured against risk-weighted assets, and this tool builds that measurement from the ground up.

How To Use This Model

Reading This Tool

Enter capital by tier, risk-weighted exposures by asset class, total leverage exposure, and liquidity inputs.

The tool computes CET1, Tier 1, Total Capital and Leverage ratios against OSFI's Basel III minimums, including the capital conservation buffer and Domestic Stability Buffer, plus the Liquidity Coverage Ratio, and flags any ratio that falls short.

Capital

Risk-Weighted Exposures ($M)

Leverage & Liquidity

Sovereign exposure to well-rated governments carries a 0% risk weight under the standardized approach, corporate exposure is modeled here at a flat 100%, and retail at the standard 75%, only the mortgage weight is adjustable to reflect Basel III's loan-to-value-based buckets.

Capital & Liquidity Ratios

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CET1 Ratio -

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Tier 1 Ratio -

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Total Capital Ratio -

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Leverage Ratio (min 3.5%)

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Liquidity Coverage Ratio (min 100%)

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Total Risk-Weighted Assets

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Ratios As A Multiple Of Their Regulatory Minimum

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Why The Conservation Buffer And DSB Stack On Top Of The Bare Minimum

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Why A Non-Risk-Based Backstop Exists At All

Risk weights are model-dependent, and models can be wrong or gamed. The leverage ratio measures Tier 1 capital against total exposure with no risk weighting whatsoever, precisely so that a bank can't engineer its way to a thin capital base by loading up on assets a model happens to call "low risk."

What The LCR Is Actually Stress-Testing

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Risk-Weighted Assets By Exposure Class

Prudential Bank Regulatory Capital

The Core Formulas

RWA = Σ Exposurei × Risk Weighti
CET1 Ratio = CET1 / RWA, Tier 1 Ratio = (CET1+AT1) / RWA, Total Capital Ratio = (CET1+AT1+Tier2) / RWA
Leverage Ratio = Tier 1 Capital / Total Leverage Exposure
LCR = HQLA / Net Cash Outflows (30-Day Stress)

OSFI Minimums (Canadian D-SIBs, Illustrative)

  • CET1: 4.5% Pillar 1 minimum + 2.5% conservation buffer + Domestic Stability Buffer.
  • Tier 1: 6.0% Pillar 1 minimum + 2.5% conservation buffer + Domestic Stability Buffer.
  • Total Capital: 8.0% Pillar 1 minimum + 2.5% conservation buffer + Domestic Stability Buffer.
  • Leverage Ratio: 3.5% minimum for domestic systemically important banks.
  • Liquidity Coverage Ratio: 100% minimum at all times, not just on average.

When To Actually Use This Model

  • Teaching Basel III capital adequacy mechanics in a financial institutions or bank regulation course.
  • Building intuition for how portfolio mix (sovereign versus mortgage versus corporate) drives RWA and therefore capital ratios, independent of the raw balance sheet size.
  • Illustrating why a bank can be balance-sheet-heavy but capital-light, or vice versa, to students unfamiliar with risk-weighting.

Key Assumptions & Limitations

  • This tool uses the standardized approach with simplified, static risk weights, banks using the Internal Ratings-Based approach derive weights from their own modeled PD/LGD/EAD, subject to Basel III output floors.
  • Real capital stacks include numerous regulatory deductions and adjustments (goodwill, deferred tax assets, minority interests) omitted here for clarity.
  • Actual OSFI minimums, buffers and D-SIB surcharges are set and updated by OSFI directly, always confirm the current Capital Adequacy Requirements (CAR) Guideline before relying on specific thresholds.

Foundational Reference

Basel Committee on Banking Supervision. (2017). Basel III: Finalising Post-Crisis Reforms. Bank for International Settlements. Implemented in Canada via OSFI's Capital Adequacy Requirements (CAR) Guideline.

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