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Capital and regulation

Risk Weighted Assets (RWA)

A bank's assets scaled by how risky they are, used as the denominator for capital ratios.

Risk Weighted Assets adjust the size of exposures for their risk. A safe government bond may carry a low or zero weight, while an unsecured loan carries a high one, so the same balance sheet size can imply very different capital needs.

Capital ratios such as the CET1 ratio are measured against RWA, so how RWA is calculated has a direct effect on how much capital a bank must hold.

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