Scenario 3

The Central Bank of Oman (CBO) is the supervisor of all the banks in Oman. To protect the interest of the depositors the CBO place many controls such as statutory reserve requirements. The capital adequacy ratio (CAR) is one of the main ratios that the banks are required to be fulfilled to comply with CBO regulations.

Task 1

Explain the importance of maintaining the capital adequacy ratio (CAR) by every banking institution in Oman? Your explanation should be covered with different tiers and demonstrate your understanding of risk-weighted assets (RWA).