---
entity_slug: bank_capital_adequacy
evaluator: null
evaluated_at: '2026-02-23T00:37:07.690141'
overall_score: 4.0
scores:
- name: definition_precision
  value: 4.0
  max_value: 5.0
  rationale: The definition clearly articulates bank capital adequacy as the sufficiency
    of capital relative to risks and obligations, with a specific functional purpose
    (absorbing losses and maintaining operations). It avoids circularity and captures
    a distinct financial concept, though it could be slightly more precise about measurement
    criteria.
- name: source_grounding
  value: 3.0
  max_value: 5.0
  rationale: While Smith does discuss banking capital and stability in Book II, Chapter
    2, the modern regulatory concept of "capital adequacy" as a formal framework may
    be somewhat anachronistic for Smith's era. The underlying principles are present
    in Smith's work, but the specific framing reflects later banking theory developments.
- name: domain_placement
  value: 5.0
  max_value: 5.0
  rationale: The "Regulation" domain assignment is perfectly appropriate, as capital
    adequacy is fundamentally a regulatory concept concerned with prudential oversight
    and systemic stability. This clearly belongs in the regulatory framework rather
    than in operational or market domains.
- name: vsm_relevance
  value: 4.0
  max_value: 5.0
  rationale: This entity maps well to S3 (internal regulation/audit) as it represents
    a regulatory control mechanism that monitors and maintains system viability. It
    also has some relevance to S2 (coordination/anti-oscillation) in preventing systemic
    banking disruptions.
- name: explanatory_value
  value: 4.0
  max_value: 5.0
  rationale: The entity provides strong explanatory power by illuminating the structural
    relationship between capital reserves, risk management, and banking system stability.
    It explains a key mechanism for preventing financial system failures rather than
    merely describing a surface phenomenon.
---

# Evaluation: Bank Capital Adequacy

## definition_precision — 4.0 / 5.0

The definition clearly articulates bank capital adequacy as the sufficiency of capital relative to risks and obligations, with a specific functional purpose (absorbing losses and maintaining operations). It avoids circularity and captures a distinct financial concept, though it could be slightly more precise about measurement criteria.

## source_grounding — 3.0 / 5.0

While Smith does discuss banking capital and stability in Book II, Chapter 2, the modern regulatory concept of "capital adequacy" as a formal framework may be somewhat anachronistic for Smith's era. The underlying principles are present in Smith's work, but the specific framing reflects later banking theory developments.

## domain_placement — 5.0 / 5.0

The "Regulation" domain assignment is perfectly appropriate, as capital adequacy is fundamentally a regulatory concept concerned with prudential oversight and systemic stability. This clearly belongs in the regulatory framework rather than in operational or market domains.

## vsm_relevance — 4.0 / 5.0

This entity maps well to S3 (internal regulation/audit) as it represents a regulatory control mechanism that monitors and maintains system viability. It also has some relevance to S2 (coordination/anti-oscillation) in preventing systemic banking disruptions.

## explanatory_value — 4.0 / 5.0

The entity provides strong explanatory power by illuminating the structural relationship between capital reserves, risk management, and banking system stability. It explains a key mechanism for preventing financial system failures rather than merely describing a surface phenomenon.