Tier 1 Capital

AAA

DEFINITION of 'Tier 1 Capital'

A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves.

INVESTOPEDIA EXPLAINS 'Tier 1 Capital'

Equity capital includes instruments that can't be redeemed at the option of the holder.

VIDEO

Loading the player...
RELATED TERMS
  1. Core Capital

    The minimum amount of capital that a thrift bank, such as a savings ...
  2. Capital Purchase Program - CPP

    A program sponsored by the U.S. Treasury designed to provide ...
  3. Undisclosed Reserves

    The unpublished or hidden reserves of a financial institution ...
  4. Tier 2 Capital

    One of two categories by which a bank's capital is divided. Tier ...
  5. Capital Adequacy Ratio - CAR

    A measure of a bank's capital. It is expressed as a percentage ...
  6. Capital Requirement

    The standardized requirements in place for banks and other depository ...
RELATED FAQS
  1. What percent of capital should banks hold relative to its risk weighted assets?

    As of 2015, banks are required to hold 4.5% of common equity of risk-weighted assets under the provisions of the Basel III ... Read Full Answer >>
  2. If my brother-in-law, who works at a pharmaceutical company, tells me about his research ...

    Tier 1 capital measures a bank's financial strength. It is composed of the company's common stock and retained earnings. ... Read Full Answer >>
  3. What are some of the well-known no-load funds?

    The capital adequacy ratio promotes stability and efficiency of worldwide financial systems and banks. The capital to risk-weighted ... Read Full Answer >>
  4. What is the difference between tier 1 capital and tier 2 capital?

    Under the Basel Accord, a bank's capital consists of tier 1 capital and tier 2 capital, and the two types of capital are ... Read Full Answer >>
  5. How can I calculate the leverage ratio using tier 1 capital?

    The tier 1 leverage ratio is used to determine the capital adequacy of a bank or a holding company, and it places constraints ... Read Full Answer >>
  6. Why is the capital adequacy ratio important to shareholders?

    The capital adequacy ratio (CAR) measures the amount of capital a bank retains compared to its risk. National regulators ... Read Full Answer >>
  7. What are the Basel III rules, and how does it impact my bank investments?

    The Basel III rules are a regulatory framework designed to strengthen financial institutions by placing guidelines pertaining ... Read Full Answer >>
  8. I know there is a form of deposit insurance where a portion of my bank account deposits ...

    First things first, it's only partially correct to think that a portion of your bank deposits is protected. The Federal Deposit ... Read Full Answer >>
Related Articles
  1. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  2. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  3. Personal Finance

    Using Economic Capital To Determine Risk

    Discover how banks and financial institutions use economic capital to enhance risk management.
  4. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  5. Personal Finance

    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.
  6. Personal Finance

    How Basel 1 Affected Banks

    This 1988 agreement sought to decrease the potential for bankruptcy among major international banks.
  7. Savings

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  8. Savings

    Bank Lingo: Routing Number Vs. Account Number

    Each consumer bank account has its own personal ID. And so does the bank. How do these numbers function and how do they protect the account holder?
  9. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  10. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!