Capital adequacyIntroduction: There is a close relationship between capital adequacy and the financial system, but it is important to have an overview before proceeding to a more detailed study of what is happening in the financial system. There is a constant flow of money and funds through the financial system due to financial institutions as they facilitate the movement of money between borrowers and lenders (lecture notes, chapters 8, 9, 15). A financial institution is basically a company like a bank which acts as a safe place for depositors to keep their money and also give loans with interest to others and this is how they develop the institution. It is the basic concept of how a country's economy works and also how a bank works. All the banks are connected to each other and if there is a problem in any of the banks, the bank loses its image in the minds of people and if it is a big problem it can cause disaster to the within the country's financial system and this can only be caused by a lack of liquidity. To have an efficient system, the bank must ensure it is liquid to avoid any problems. (Chapter 1) To avoid this problem, the government establishes regulations for banks through prudential supervision (Chapter 2). Australia's regulator is the Australian Prudential Regulatory Authority (APRA), while in Singapore it is the Monetary Authority of Singapore (MAS). The key concept of their work is to assure people that their money is in safe hands. Keeping capital safe is essential because it helps the bank grow and repay its debts when needed (Chapter 2). In the context of an emergency, the government having some control over the banks, it asks them to keep some money in the middle of paper ......ence of capital measurement and capital standards' , Basel Committee on Banking Supervision, vol.1, n°1, p1-28. Brenton G., Carlos S & Geoffrey S 2000, “Capital Management of Deposit Takers: The impact of Prudential Requirements”, Australian Prudential Regulatory Authority, vol. 1, No. 1, p 1-33.Conclusion: After carrying out research in groups and alone and collecting information, the Basel system is very useful in stabilizing the financial situation. It has greatly helped Australia achieve a milestone and become the 4th largest fund. management industry (Economic Lateral, 2007) and also discusses how other countries can also use it, as it explains the advantages and disadvantages of Basel and AFS. a fund management provider for the world”, Lateral Economic, vol. 2, no. 1,p.. 2.