Tier 1 capital

Common card · No. 314520

Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. Under the Basel III standards of the Basel Committee on Banking Supervision (BCBS), it is going-concern capital: the sum of Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1), after regulatory adjustments. CET1 consists primarily of common stock, share premium, retained earnings and other disclosed reserves. AT1 consists of instruments that absorb losses while the bank remains open but do not meet the CET1 tests, such as perpetual non-cumulative preferred stock. Capital in this sense is related to, but different from, the accounting concept of shareholders' equity. Both Tier 1 and Tier 2 capital were first defined in the Basel I accord and remained substantially the same in Basel II. Under those accords, Tier 1 (also called core capital) consisted mainly of common stock and disclosed reserves, and could also include non-redeemable non-cumulative preferred stock. From 1998 the BCBS also...

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