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{{aai|crr|{{image|CS tier 1 chart|png|[[Lucky]]’s CET1 and AT1 compared since issue, yesterday.}}}}{{ | {{aai|crr|{{image|CS tier 1 chart|png|[[Lucky]]’s CET1 and AT1 compared since issue, yesterday.}}}}{{Quote|''The first rule of [[Systemic Solvency Club]] is YOU DON’T TALK ABOUT SYSTEMIC SOLVENCY CLUB.''}} | ||
{{dpn|/tɪə wʌn ˈkæpɪtl/|n|}} | |||
That part of a regulated financial institution’s [[capital structure]] below everything else, that gives the bank’s depositors and other senior creditors — and the wider financial community we like to call “[[Systemic Solvency Club]]” — comfort that debts will be paid and deposit withdrawals honoured. | |||
If you are a regulated financial institution — but ''only'' if you are one of those — you must “hold” a certain percentage of “tier 1 capital” in order to stop anyone breaking the first rule of Systemic Solvency Club. | If you are a regulated financial institution — but ''only'' if you are one of those — you must “hold” a certain percentage of “tier 1 capital” in order to stop anyone breaking the first rule of Systemic Solvency Club. | ||
=== To “have” or to “hold”? === | === To “have” or to “hold”? === | ||
There is a certain type of financial analyst who | There is a certain type of financial analyst who gets annoyed if you say banks “hold” capital, for the pedantic reason that capital is a really just what is left of a bank’s assets after you deduct its liabilities, and so isn’t something you “hold”, as such. | ||
Capital is a ''difference'' between two other things, rather than a thing in itself. | |||
Less pedantic types feel that since you have to monitor that difference every day, and do something, like issuing more tier 1 capital securities, if it isn’t there, this isn’t really a distinction worth getting het up about. | Less pedantic types feel that since you have to monitor that difference every day, and do something, like issuing more tier 1 capital securities, if it isn’t there, this isn’t really a distinction worth getting het up about. | ||
But | But it can be important, as we will see. | ||
So: what are “tier 1 capital securities”? | |||
==Tier 1 common equity== | ==Tier 1 common equity== | ||
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Until 2008, that is all there really was. | Until 2008, that is all there really was. | ||
Then the [[global financial crisis]] happened, and the global community of bank regulators | Then the [[global financial crisis]] happened, and the global community of bank regulators, executives ² | ||
Aand their assorted committees, councils and forums — [[Systemic Solvency Club]] — got together, promulgated a largely coordinated set of bank resolution and recovery regimes, in the process savagely increasing tier one capital requirements for all banks. Especially big ones. | |||
==[[Alternative tier 1 capital]]== | ==[[Alternative tier 1 capital]]== |