Bank "x" has made an investment in a non-resident financial entity "y" (30% shareholding) which is filing its return with the respective supervisor under the Basel II capital adequacy rules. The aggregation of capital and RWAs will be carried out as follows:

Bank:

Eligible regulatory capital = 3,000,000¹⁰

Risk weighted assets = 20,000,000

CAR = 3,000,000/20,000,000

= 15%

Investee:

Eligible regulatory capital = 1,000,000

Risk weighted assets = 10,000,000

CAR = 1,000,000/10,000,000

= 10%

Consolidated Capital Adequacy Ratio:

Eligible regulatory capital = 3,300,000 [(3,000,000 + (1,000,000*30%)]

Risk weighted assets = 23,000,000 (20,000,000 + (10,000,000*30%)]

CAR = 3,300,000/23,000,000

= 14.35%

¹⁰ This capital amount is after all necessary deductions, including investment in "y".