A bank's assets and off-balance-sheet items weighted by their riskiness. Capital requirements are set as a percentage of them.
Where you will meet it
Risk-weighted assets comes up in 24 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“Regulatory capital is the minimum the supervisor requires, calculated with prescribed formulas such as risk weights.”
Enterprise Risk Management and Future Trends FRM Part I · Foundations of risk management
“A stress test applies a severe but plausible adverse scenario, usually a coherent set of macroeconomic and market shocks over several periods, and projects its effect on losses, earnings, risk-weighted assets, liquidity and capital.”
Introduction to Credit Risk Modeling and Assessment FRM Part II · Credit risk measurement and management
“Capital adequacy asks whether capital relative to risk-weighted assets can absorb losses, using Tier 1 and total capital ratios.”
The Global Drivers of Private Credit FRM Part II · Current issues in financial markets
“Banks fund mostly with cheap deposits and debt but face capital requirements, so a higher risk weight raises risk-weighted assets and, all else equal, required capital.”
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