What is the 'Tier 1 Capital Ratio'
The Tier 1 capital ratio is the comparison between a banking firm's core equity capital and total riskweighted assets. A firm's core equity capital is known as its Tier 1 capital and is the measure of a bank's financial strength based on the sum of its equity capital and disclosed reserves, and sometimes nonredeemable, noncumulative preferred stock. A firm's riskweighted assets include all assets that the firm holds that are systematically weighted for credit risk. Central banks typically develop the weighting scale for different asset classes, such as cash and coins, which have zero risk, versus a letter or credit, which carries more risk.
BREAKING DOWN 'Tier 1 Capital Ratio'
Regulators use the Tier 1 capital ratio to grade a firm's capital adequacy as one of the following rankings: wellcapitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. A firm must have a Tier 1 capital ratio of 6% or greater, and not pay any dividends or distributions that would affect its capital, to be classified as wellcapitalized. Firms that are ranked undercapitalized or below are prohibited from paying any dividends or management fees. In addition, they are required to file a capital restoration plan.

Tier 1 Common Capital Ratio
A measurement of a bank's core equity capital compared with its ... 
Tier 1 Capital
A term used to describe the capital adequacy of a bank. Tier ... 
Tier 1 Leverage Ratio
The relationship between a banking organization's core capital ... 
Tier 2 Capital
One of two categories by which a bank's capital is divided. Tier ... 
Tier 3 Capital
Tertiary capital held by banks to meet part of their market risks, ... 
Core Capital
The minimum amount of capital that a thrift bank, such as a savings ...

Markets
Calculating Tier 1 Common Capital Ratio
The tier 1 common capital ratio compares a financial institution’s core equity capital to its riskweighted assets. 
Investing
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. 
Markets
What's Tier 2 Capital?
Tier 2 capital is a category of supplementary capital that banks hold. 
Markets
Explaining Tier 1 Capital
Tier 1 capital refers to the core capital a bank must maintain in relation to its assets. 
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. 
Markets
Explaining the Tier 1 Leverage Ratio
The Tier 1 leverage ratio measures a bank’s core capital against its total assets. 
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 ... 
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. 
Markets
Explaining RiskWeighted Assets
Riskweighted assets is a banking term that refers to a method of measuring the risk inherent in a bank’s assets, which is typically its loan portfolio. 
Managing Wealth
Using Economic Capital To Determine Risk
Discover how banks and financial institutions use economic capital to enhance risk management.

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