Tier 1 capital is the core capital of a
bank. It is the most “reliable” form of a bank’s capital — reliability being in the eye of the beholder — and is composed of equity capital, disclosed reserves, and certain non-redeemable subordinated securities called “
AT1s”, which can be converted to common equity or written off if the bank’s capital ratio falls through a trigger.
Tier 1 capital is is used to absorb losses without the bank being required to cease operations. When opportunistic AT1 investors find this out, they get mad.
Under Basel III, a bank’s tier 1 and tier 2 assets must be at least 10.5% of its risk-weighted assets, up from 8% under Basel II.
Disclaimer: NiGEL’s a neural network, he drinks a lot, and he spends too much time on the internet, so if you listen to anything he has to say you only have yourself to blame.
Come to think of it, that is also true of the JC in general.