A bank’s Tier 1 Capital is judged by regulators to represent the bank’s core capital. The FDIC states that:

“Tier 1 Capital includes:

  1. Common stock, undivided profits, paid-in-surplus;
  2. Non-cumulative perpetual preferred stock;
  3. Minority interests in consolidated subsidiaries;

Minus

  1. All intangible assets (with limited exceptions);
  2. Identified losses;
  3. Deferred tax assets in excess of the limit set forth in section 325.5(g)”

http://www.fdic.gov/regulations/resources/directors_college/sfcb/capital.pdf – pg.3

Tier 1 Capital is also taken into consideration when judging the reserve requirements of a bank, and is also used as the numerator of different capital adequacy ratio calculations.

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