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LeoGlossary: Tier 1 Capital

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Tier 1 Capital refers to the capital held in a bank's reserves. It is used to fund the business activities of the bank's clients.

This is used to measure a the financial strength of a bank, along with Tier 2 capital.

Under Basel III, the ratio is 6% of risk weighted assets.

Capital of this nature is:

  • retained earnings
  • common stock
  • preferred stock

The idea is for the bank to be able to withstand large losses that threaten the stability of the financial institution.

General:

H2
H3
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