What is 'Core Capital'

Core capital is the minimum amount of capital that a thrift bank, such as a savings bank or savings and loan company, must have on hand in order to comply with Federal Home Loan Bank regulations. Core capital consists of equity capital and declared reserves. The minimum requirement was put in place to ensure that consumers are protected when creating financial accounts.

BREAKING DOWN 'Core Capital'

Following the financial crisis of 2008, regulators began focusing heavily on banks' Tier 1 capital, which consists of core capital, but can also include nonredeemable, noncumulative preferred equity. This is more stringent than normal capital ratios, which can also include Tier 2, and lesser-quality capital.

RELATED TERMS
  1. Thrift Bank

    A financial institution focusing on taking deposits and originating ...
  2. Tier 3 Capital

    Tertiary capital held by banks to meet part of their market risks, ...
  3. Thrift

    Thrifts are savings and loans associations. Thrifts also refer ...
  4. Tier 1 Leverage Ratio

    The relationship between a banking organization's core capital ...
  5. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  6. Capital Investment

    Funds invested in a firm or enterprise for the purposes of furthering ...
Related Articles
  1. Personal Finance

    What's Tier 2 Capital?

    Tier 2 capital is a category of supplementary capital that banks hold.
  2. Small Business

    Understanding the Capital Adequacy Ratio

    The capital adequacy ratio (CAR) is an international standard that measures a bank’s risk of insolvency from excessive losses. Currently, the minimum acceptable ratio is 8%. Maintaining an acceptable ...
  3. Personal Finance

    Calculating the Tier 1 Capital Ratio

    The Tier 1 capital ratio is a measure of a depository financial institution’s financial health and capital adequacy.
  4. Investing

    Understanding Bank of America's Capital Structure (BAC)

    For banks, especially large banks such as Bank of America, capital structure has to both meet funding needs and satisfy the regulator's capital requirements.
  5. Insights

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  6. Investing

    Calculating Tier 1 Common Capital Ratio

    The tier 1 common capital ratio compares a financial institution’s core equity capital to its risk-weighted assets.
  7. Investing

    Ares Capital (ARCC) to Buy Rival for $3.4 bln (ARCC, ACAS)

    Private equity firm Ares Capital inks deal to acquire smaller rival American Capital for $3.4 bln in stock and cash.
  8. Small Business

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
RELATED FAQS
  1. What is the difference between tier 1 capital and tier 2 capital?

    Learn what tier 1 capital and tier 2 capital, the differences between them, and how to calcu, alate a bank's capital ratio. Read Answer >>
  2. How can I calculate the tier 1 capital ratio?

    Learn about the tier 1 capital ratio, what the ratio indicates about a firm's capital adequacy and how to calculate a firm's ... Read Answer >>
  3. Why is the capital adequacy ratio important to shareholders?

    Understand what the capital adequacy ratio is and why it is a very important metric of financial soundness for evaluating ... Read Answer >>
  4. What measures can be used to evaluate the capital adequacy of a bank?

    Examine some of the different financial measurements that are most commonly used to assess capital adequacy within the banking ... Read Answer >>
  5. How does total capital investment influence economic growth?

    Discover the basic relationship between capital investment and economic growth, and why improving the capital structure increases ... Read Answer >>
  6. What is the difference between financial capital and economic capital?

    Read about the differences between types of financial capital, which companies use to raise money, and economic capital models ... Read Answer >>
Hot Definitions
  1. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  2. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  3. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  4. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  5. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
  6. Merchandising

    Merchandising is any act of promoting goods or services for retail sale, including marketing strategies, display design and ...
Trading Center