Regulatory capital adequacy ensures financial institutions hold capital buffers proportionate to their risk exposures, protecting depositors and financial system stability. Basel III frameworks prescribe minimum ratios of high-quality capital to risk-weighted assets, incorporating credit, market, and operational risks. Banks must maintain Common Equity Tier 1 ratios above regulatory minimums, with buffers for systemically important institutions. Falling below requirements triggers supervisory intervention, dividend restrictions, and potential resolution actions. Capital planning processes stress test adequacy under adverse scenarios and inform strategic decisions about business mix, growth, and distributions. Adequate capital serves as the ultimate risk absorber when other risk management measures fail.