Tier 1 capital: Difference between revisions

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-{{aai|crr|{{image|CS tier 1 chart|png|[[Lucky]]’s CET1 and AT1 compared since issue, yesterday.}}}}{{dpn|/tɪə wʌn ˈkæpɪtl/|n|}}
+{{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.''}}
-Of a regulated financial institution, that part of the 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 their debts will be met and deposit withdrawals honoured.
+{{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.
 === To “have” or to “hold”? ===
-There is a certain type of financial analyst who get annoyed if you say banks “hold” capital, for the pedantic reason that capital is a really just what is left of your assets after you deduct your liabilities, and isn’t something you “hold”, as such. It is a difference between two other things, rather than a thing in itself.
+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.
-But that pedantic distinction can be important, as we will see.
+But it can be important, as we will see.
-Now: what are “tier 1 capital securities,” then?
+So: what are “tier 1 capital securities”?
 ==Tier 1 common equity==
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 Until 2008, that is all there really was.
-Then the [[global financial crisis]] happened, and the global community of bank regulators and 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.
+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]]==