The purpose of capital adequacy ratio is to restrain the excessive expansion of risky assets, protect the interests of depositors and other creditors, and ensure the normal operation and development of financial institutions such as banks. Financial management authorities in various countries generally control the capital adequacy ratio of commercial banks, with the aim of monitoring the ability of banks to resist risks.

Capital adequacy ratio has different calibers. The main ratios are the ratio of capital to deposits, the ratio of capital to liabilities, the ratio of capital to total assets and the ratio of capital to risky assets. As the basis of international banking supervision, Basel Accord stipulates that the capital adequacy ratio is measured by the ratio of capital to weighted risk assets, and its target standard ratio is 8%. ?

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Increasing retained profits and internal financing is one of the ways to improve capital adequacy ratio. Compared with external financing, internal financing has the characteristics of small financing scale and paying attention to the accumulation of banks year by year, but internal financing is the cheapest way to increase capital, because it saves all the costs of listing financing, and can also prevent shareholders' rights and interests from being diluted and affect shareholders' control rights.

In the capital composition of state-owned commercial banks, core capital is the main part, but most of these core capitals are in fixed assets with weak liquidity, or are used to issue medium-and long-term loans with high risks, and the core capital is full of water. The non-performing loan ratio of state-owned commercial banks in China has reached 20% >: 30%, which has exceeded the total capital of existing banks, and the total interest receivable is also quite large.

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