Comparing Norwegian Banks’ Capital Ratios

Abstract

The use of different approaches makes it difficult to compare the banks’ reported capital ratios. To improve the basis for comparing banks’ financial strength, in this article the same approach is employed to calculate capital ratios in all Norwegian banks. The calculations indicate that the financial strength of the banks using the standardised approach is underestimated compared with IRB banks in their reported capital ratios. The calculations also produce a different ranking of financial strength within the group of IRB banks.