What is the 'Tier 1 Leverage Ratio'
The Tier 1 leverage ratio is the relationship between a banking organization's core capital and total assets. The Federal Reserve develops capital adequacy guidelines for bank holding companies. The Tier 1 leverage ratio is calculated by dividing Tier 1 capital ratio by the firm's average total consolidated assets. The Tier 1 leverage ratio is an evaluative tool used to help determine the capital adequacy and to place constraints on the degree to which a banking firm can leverage its capital base.
BREAKING DOWN 'Tier 1 Leverage Ratio'
Strong bank holding companies, rated composite 1 under the BOPEC (Bank subsidiaries, Other subsidiaries, Parent, Earnings, Capital) rating system of bank holding companies, must have a Tier 1 leverage ratio of 3%. For all other banks, the minimum ratio is 4%. Any banking organizations that have supervisory, financial, operational or managerial difficulties are expected to maintain capital ratios above the minimum levels. In addition, bank firms that are expecting or going through significant growth are expected to maintain ratios well above the minimum levels as a hedge against risk.

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How can I calculate the leverage ratio using tier 1 capital?
Learn about the tier 1 leverage ratio, how to calculate the tier 1 capital ratio and what this leverage ratio indicates about ... Read Answer >> 
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 >> 
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 >> 
What does it mean when a company has a high capital adequacy ratio?
Learn about the capital adequacy ratio, what the ratio measures, how it is calculated and what it means when a bank has a ... Read Answer >> 
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 >> 
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 >>