Tangible Common Equity Ratio - TCE


DEFINITION of 'Tangible Common Equity Ratio - TCE'

A ratio used to determine how much losses a bank can take before shareholder equity is wiped out. The Tangible Common Equity (TCE) ratio is calculated by taking the value of the company's total equity and subtracting intangible assets, goodwill and preferred stock equity and then dividing by the value of the company's tangible assets. Tangible assets is the company's total assets less goodwill and intangibles.

BREAKING DOWN 'Tangible Common Equity Ratio - TCE'

This ratio became popular when evaluating banks during the credit crisis in 2008. Its conservative approach has made it a very risk free way for investors to evaluate worst case scenarios of their investments.

  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Credit Crisis

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  3. Commercial Bank

    A financial institution that provides services, such as accepting ...
  4. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  5. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  6. Contagion

    The spread of market changes or disturbances from one region ...
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