Thesis: Capital Adequacy Ratio

Sample Thesis Paper

Investopedia (2009), the financial website defines the Capital Adequacy Ratio as follows:

“Capital Adequacy Ratio is a measure of a bank’s capital. It is expressed as a percentage of a bank’s risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world’. [Online]

The Capital Adequacy Ratio is a very important ratio used by banks to protect the depositors of the bank. The SBP has set 10% Capital Adequacy Ratio which banks need to maintain at all times (SBP 2008). The Capital Adequacy Ratio for MCB was 18.65% in 2008 and 17.88% in 2007, whereas the Capital Adequacy Ratio for HBL was 12.33% and 12.43% over the same period. The annual report of SBP showed that commercial banking industry Capital Adequacy Ratio was 13.4 % in 2007((SBP 2007).

MCB has a higher Capital Adequacy Ratio as compared to both HBL and the industry in general. Hence, it is much sounder and safer for depositors than HBL and other firms in the industry.

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