Tier 1 Capital is a core measure of a bank's financial strength from a regulator's point of view, primarily consisting of common equity and disclosed reserves. It serves as a buffer to absorb losses and protect depositors, ensuring the bank remains solvent during financial stress.

Tier 1 Capital

Core measure of financial strength

bank's financial strength

regulator's point of view

Common equity represents the ownership interest held by shareholders in a company, giving them voting rights and a residual claim on assets after liabilities are settled. It is a key component of a company's capital structure and is often analyzed to assess financial health and investor returns.

common equity

disclosed reserves

buffer to absorb losses

protect depositors

Bank solvency refers to a bank's ability to meet its long-term financial commitments and continue its operations without requiring external assistance. It is primarily assessed by examining the bank's capital adequacy, asset quality, and the sustainability of its earnings.

Bank Solvency

Financial stress refers to the emotional and psychological strain experienced when an individual or household perceives their financial resources as insufficient to meet their financial obligations or maintain their desired standard of living. It can lead to negative health outcomes, decreased productivity, and strained personal relationships, making effective financial management and support systems crucial for mitigation.

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