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Risk weighted capital ratio measures the financial stability of a bank by measuring its available
capital as a percentage of its risk-weighted exposure to credit. The aim is to safeguard depositors

to ensure that it can modify a reasonable amount of loss if the bank were experiencing a loss and
must comply with statutory capital requirements. The graph above shows the risk weighted capital
ratio over a 3-year period from 2016 to 2018. There is an upward trend in risk weighted capital

ratio as it increases from 11.70% to 12.10% and 12.70% respectively from year 2016 until year
2018. Public Bank can use risk weighted capital to assess whether the bank has enough capital

to assume any losses before it becomes insolvent and in worst case, they may lose its depositor
funds which is the main source for this ratio. The bank needs to monitor this ratio so that they can
meet its financial obligations to avoid any economic downturn in their business. Ways to increase

its risk-adjusted capital ratio are by targeting the bank’s retained earnings, issue new equity in a
bank and make changes to the assets side of the bank’s balance sheet.

2. Core Capital Ratio

Core Capital Ratio

13.40%
13.10%
13.50%
12.80%

13.00%
12.50%

2016 2017 2018

Core capital ratio refers to the minimum capital required by a financial institution that

specializes in offerings savings account or a savings and loan company must have on hand in
order to comply with the regulations. Core capital can be used to cover its losses and does not
require the bank to discontinue their operations. Based on the graph above, it increases year by

year meaning that there is an upward trend in core capital ratio from 12.80% to 13.10% and
13.40% in year 2018. Public Bank’s core capital ratio is good as it is less susceptible to failure

because they have more core capital and fewer risk-weighted assets.

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