Coverage ratio

For a bank – unless explicitly stated otherwise – the ratio of – capital equity – plus loans and advances to borrowers (loan reserves) – minus nonperforming loans – to total assets. – The International Monetary Fund has precisely defined the individual items that fall under each of the above totals. In addition, the national supervisory authorities have defined corresponding calculations. – In the case of mortgage banks, the assets required in Germany under the Mortgage Pfandbrief Net Present Value Regulation (coverage assets to ensure timely payment of interest and principal). The German Federal Financial Supervisory Authority (BaFin) performs coverage audits for this purpose. – See German Regulation on the Determination of the Mortgage Lending Value (Beleihungswertermittlungsverordnung), coverage ratio, coverage review, capital ratio, regulatory capital ratio, Cook ratio, financial stability, Capital Requirements Regulation, liquidity crisis plan, liquidity buffer. – Cf. BaFin’s 2004 Annual Report, p. 120 (required corrections to cover assets), BaFin’s 2005 Annual Report, p. 112 (Pfandbrief creditors’ claims must be covered by assets such as mortgages in both nominal and present value terms), and the respective BaFin Annual Report.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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