Capital Adequacy Directive

Capital adequacy directive is a set of rules that banks must follow so as to have enough money to cover their customers' deposits. This is like a rulebook that banks must follow in order to be allowed to take deposits and lend money. Banks must keep a certain amount of money in their "capital". This is money that is put aside to handle any unexpected losses. Banks must also track how much money they have and make sure it is enough to cover the daily operations of the bank. They also have to make sure they are not taking any risks that could cause them to lose all the money they have. Banks must follow this rulebook so they can stay in business and protect the customers' money.