Capital is one of the key factors to be considered when the safety and soundness activity of bank is evaluation. An adequate capital based serves as a safety network for a variety of ricks to which a bank is exposed in the course of its business. He absorbs the possible losses and provided a basis for maintaining depositor confidence in bank. Also, the capital is the ultimate determinant of a bank’s lending capacity. A bank’s balance sheet cannot be expanded beyond the level determined by its capital adequacy ratio. Therefore, the availability of capital consequently determines the maximum level of assets.
