Tier 1

Banking - capital adequacy

(T1).

Tier 1 is the highest quality capital.

Contrasted with Tier 2, which is of lower quality.

Tier 1 is sometimes known as 'going concern' loss absorbing capital.

Tier 1 principally comprises equity, subject to regulatory deductions and the inclusion of some preferred shares and some perpetual bonds.

Tier 1 capital is classified as Common Equity Tier 1 (CET1) or Additional Tier 1 (AT1), CET1 having superior loss-absorbing quality.

Tier 2 capital comprises eligible long dated subordinated debt.

(Tier 2 is sometimes known as 'gone concern' loss absorbing capital.)

See also

• Additional Tier 1
• Basel II
• Basel III
• Capital
• Capital adequacy
• Capital Adequacy Directive
• Common Equity Tier 1
• CRD IV
• Equity
• Going concern
• Gone concern
• Leverage Ratio
• Perpetual bond
• Preferred shares
• Principal write down
• Subordinated debt
• Tier 2