Tier 1 Capital

Tier 1 Capital refers to the core capital of a bank, consisting primarily of common equity, such as common shares and retained earnings. It represents a bank’s financial strength and ability to absorb losses. Regulators require a minimum level of Tier 1 Capital to ensure stability and minimize the risk of bank failures. Essentially, it’s a cushion that protects depositors and the financial system, indicating how well a bank can withstand economic downturns. A higher percentage of Tier 1 Capital means that the bank is better positioned to handle financial challenges and risks.