Legal Definitions - deposit ratio

The deposit ratio is a financial ratio that measures the proportion of a bank's total deposits to its total capital. It is calculated by dividing the total deposits by the total capital.

If a bank has $100 million in deposits and $20 million in capital, the deposit ratio would be 5:1 ($100 million/$20 million).

The deposit ratio is an important metric for banks as it indicates the level of risk they are taking on. A higher deposit ratio means that the bank is relying more heavily on deposits to fund its operations, which can be risky if there is a sudden withdrawal of deposits. On the other hand, a lower deposit ratio means that the bank has more capital to absorb losses and is less reliant on deposits.