Tier 1 Capital Adequacy Ratios of Asian Banks

Due to regulatory constraints many Asian banks hold abundance of capital reserves. This protected the banks during last year’s financial crisis. In some ways Asian banks were insulated from the crisis that almost sank the western financial system. Only with extraordinary government bailouts were some of the western banks able to survive.

One of the ways the a bank’s strength can be measured is the Tier 1 Capital Adequacy Ratio (CAR). Asian banks’ have high Tier 1 CARs as shown in the chart below. The data is from mid March of 2009.

Source: CLSA Asia Pacific Markets – Research on Public Bank 9/3/09

For example ICICI Bank of India (IBN) has nearly a 10% Tier 1 CAR compared to under 4% for Citibank (C). Simiarly other Asian banks like ICBC of China, Maybank of Malaysia, DBS of Singapore have much higher Tier 1 Ratios than western banks.

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