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# What is Tier 1 Risk-Based Capital Ratio?

Updated: 9/18/2023

Wiki User

13y ago

It's the ratio of leverage to core capital at a bank, wikipedia has an excellent explanation

Wiki User

13y ago

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Q: What is Tier 1 Risk-Based Capital Ratio?
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### How Capital Adequacy Ratio of a Bank is arrived?

The Capital Adequacy Ratio of a bank is arrived at by comparing the sum of its Tier 1 and Tier 2 capital to its risk. The equation for expressing the Capital adequacy ratio is: CAR=(Tier 1 Capital +Tier2 Capital)/Risk weighted assets.

### How to calculate the adversely classified items coverage ratio?

Adersely Classified Assets/Tier 1 Capital +Allowance

### What is difference between Upper 2-tier Capital and Lower 2-tier capital?

Tier 2 capital is debt that is subordinated to the majority of other calls on the bank. It is divided into Upper Tier 2 and Lower Tier 2. Upper Tier 2 debt is undated. It must be of a type unlikely to threaten the solvency of the bank. Lower Tier 2 capital is dated normally with a maturity date of more than 5 years. Lower Tier 2 capital cannot exceed 50% of Tier 1. Tier 2 capital as a whole cannot exceed Tier 1 capital.

### Why is important for a bank to have a tier 1 capital?

A tier one capital is a measure of the bank's strength. If you want a better and more reliable bank it is important for it to have a tier one capital.

### Equity capital to total assets ratio?

Bank capital to assets is the ratio of bank capital and reserves to total assets. Capital and reserves include funds contributed by owners, retained earnings, general and special reserves, provisions, and valuation adjustments. Capital includes tier 1 capital (paid-up shares and common stock), which is a common feature in all countries' banking systems, and total regulatory capital, which includes several specified types of subordinated debt instruments that need not be repaid if the funds are required to maintain minimum capital levels (these comprise tier 2 and tier 3 capital). Total assets include all nonfinancial and financial assets.

### What is a Tier 1 Capital service?

Tier 1 capital is a measure of how well a bank stands financially. I could not find anything to describe what a service for this would be; but I would have to guess that a tier 1 capital service might be a service that lists different bank standing based on this score.

### What exactly is a tier 1 capital?

A tier 1 capital is used in the banking world. It measures the bank's strengths financially from the point of view of a regulator. It is composed primarily of common stocks and reserves.

### What is the tier 1 capital used for?

Tier 1 capital is used for to measure the banks strengths financially by following certain regulations and guidelines. It measures against other banks and people who they conduct business with.

### How much is the minimum capital requirement for a commercial bank?

a minimum tier 1 common ratio of 4.5 percent plus a buffer above the minimum equal to at least 2.5 percent of RWA.

2:1

### Chennai is tier 1 or tier 2?

Chennai is tier 1 but Madras is tier 2

### What is the key distinguishing difference between a tier-1 isp and a tier-2 isp?

A tier-1 ISP connets to all other tier-1 ISP's; a tier-2 ISP connects to only a few of the tier-1 ISPs. Also a tier-2 ISP is a customer of one or more tier-1.