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. The Federal Home Loan Bank regulations require banks to have core capital in an amount that is at least 2% of the bank's assets. 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. Core capital makes up a large portion of Tier 1 capital, which regulators view as a measure of a bank's financial strength.
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.