Core Capital

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. Tier 1 Capital Ratio

    A comparison between a banking firm's core equity capital and ...
  2. Tier 1 Capital

    A term used to describe the capital adequacy of a bank. Tier ...
  3. Tier 2 Capital

    One of two categories by which a bank's capital is divided. Tier ...
  4. Tier 1 Leverage Ratio

    The relationship between a banking organization's core capital ...
  5. Thrift Bank

    A financial institution focusing on taking deposits and originating ...
  6. Bank Capital

    The difference between the value of a bank's assets and its liabilities. ...
Related Articles
  1. Investing

    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 ...
  2. Markets

    Is Your Bank On Its Way Down?

    Find out how the Tier 1 capital ratio can be used to tell if your bank is going under.
  3. Markets

    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.
  4. Markets

    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.
  5. Investing

    The Banking System: Commercial Banking - Key Ratios/Factors

    ByStephen D. Simpson, CFA As banks have very different operating structures than regular industrial companies, it stands to reason that investors have a different set of fundamental factors ...
  6. Investing

    The One Bank Poised To Thrive Despite New Regulations

    <p>Investors have been warming up to bank stocks in a big way. The KBW Bank Index jumped 50% over the past two years, and a brightening eco...
  7. Markets

    The Banking System: Commercial Banking - How Banks Are Regulated

    ByStephen D. Simpson, CFA The 2007-2008 mortgage bubble in the United States, and worldwide credit crisis, highlighted why banks are so heavily regulated; with such a key role in the economy, ...
  8. Insights

    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.
  9. Investing

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  10. Managing Wealth

    How Basel 1 Affected Banks

    This 1988 agreement sought to decrease the potential for bankruptcy among major international banks.
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. 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 >>
  3. 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 >>
  4. What is the minimum capital adequacy ratio that must be attained under Basel III?

    Find out more about the capital adequacy ratio, or CAR, and the minimum capital adequacy ratio that banks must attain under ... Read Answer >>
  5. If my brother-in-law, who works at a pharmaceutical company, tells me about his research ...

    Discover what tier 1 capital measures about a bank. Tier 1 capital levels were mandated by Basel III following the financial ... Read Answer >>
  6. What are the different ways that corporations can raise capital?

    Find out about the most common types of debt and equity capital, and how things such as interest and dividend payments factor ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center