What is Tier 1 Capital?

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Accepted Answer

Tier 1 Capital is the core measure of a bank's financial strength, representing the highest quality of capital that can absorb losses without a bank being required to cease trading, and is primarily composed of Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1) capital under the Basel III regulatory framework.

Tier 1 Capital

What is Tier 1 Capital?

What are the primary components of Tier 1 Capital and how do they differ under Basel III?

How does the Basel III framework define the minimum Tier 1 Capital Ratio and what is the role of the Capital Conservation Buffer?

Why is Tier 1 Capital considered the most critical measure of a bank's solvency and financial stability?

What is the distinction between Tier 1 Capital and Tier 2 Capital, and how do they combine to form a bank's Total Capital?

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