Instruction CPO/B-2000/2 on Regulatory Capital

Timor-Leste

(enacted in 2000)

The Instruction requires Banks must maintain minimum Regulatory Capital and at least 12 percent of Capital Adequacy Ratio.

Regulatory Capital is calculated by adding together Tier One Capital and the eligible amount of Tier Two Capital and deducting from that sum investments in the capital of other banks and financial institutions.

The Capital Adequacy Ratio is used to assess the capital adequacy of banks by comparing a bank’s Regulatory Capital to its assets and off-balance sheet exposures which have been weighted according to their relative riskiness.

The Instruction contains five parts:

I Authority and Applicability

II Requirements

III Calculations

IV Restrictions on Capital Distribution

V Reporting Requirements