Texas Ratio
Texas Ratio is a prudential-banking concept used to assess capital, liquidity, asset quality, funding resilience or the management of a bank balance sheet.
Texas Ratio is a prudential-banking concept used to assess capital, liquidity, asset quality, funding resilience or the management of a bank balance sheet.
How Texas Ratio works
In practice, the metric or rule is read together with the bank's asset mix, liability structure, supervisory framework and stress assumptions. Analysts therefore compare Texas Ratio with capital headroom, liquidity, profitability and the bank's ability to adjust its balance sheet.
Why it matters in markets
Texas Ratio matters because banks transform short-duration liabilities into longer-duration and riskier assets. Regulatory buffers and balance-sheet metrics are designed to show where that transformation can become fragile.
How to interpret Texas Ratio
Interpret Texas Ratio together with regulatory definitions and the bank's actual balance-sheet composition. Compare current levels with internal or regulatory requirements, recent trends, peer banks and stress scenarios rather than relying on one period in isolation.
Limits and context
Texas Ratio can differ across jurisdictions, accounting standards and supervisory regimes. Regulatory ratios are also snapshots and may not capture intraday liquidity, off-balance-sheet commitments or rapid changes in depositor behavior.
BondStats educational market reference. Definitions describe common market usage and are not investment, legal, accounting or regulatory advice.