Tier 1 Capital
The highest-quality bank capital under Basel III: Common Equity Tier 1 (common stock plus retained earnings) plus Additional Tier 1 (certain preferred stock and contingent convertibles that absorb losses while the bank is still a going concern). Tier 1 is the cushion that absorbs losses before depositors and senior bondholders are touched. The Basel III floor is 6 percent of risk-weighted assets, plus bank-specific buffers. CET1 alone has its own 4.5 percent floor and is the most-watched capital ratio.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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