Capital
Tier 1 Risk-Based Capital Ratio
Also known as Tier 1 RBC
The Tier 1 Risk-Based Capital ratio measures a bank's Tier 1 capital — CET1 plus Additional Tier 1 instruments — against its risk-weighted assets. It is the broader of the two Tier-1 capital measures and is still the headline capital metric for most banking comparisons.
Formula
Additional Tier 1 (AT1) instruments are perpetual non-cumulative preferred stock and certain hybrid securities that meet criteria for going-concern loss absorption. For most US community banks, AT1 is small or zero, so Tier 1 RBC is within ~10–50bp of CET1.
Why it matters
Tier 1 RBC was the original headline capital ratio before CET1 was introduced in Basel III. Regulators still require a 6% minimum plus the 2.5% capital conservation buffer (8.5% effective floor). It remains the most quoted capital number in financial press.
How to interpret
Read Tier 1 RBC alongside CET1: a large gap between them means the bank relies meaningfully on preferred stock for its capital base, which is more expensive and less flexible than common equity. Most community banks show Tier 1 RBC within 10–30bp of CET1.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 14% | Well capitalized | Comfortable buffer over 8.5% effective floor. |
| 11–14% | Adequate | Normal range for most US community banks. |
| 8.5–11% | Watch | Approaching conservation buffer thresholds. |
| < 8.5% | Concern | Inside or below the capital conservation buffer. |
Worked example
Frequently asked
Why does Tier 1 RBC matter if CET1 already exists?
Tier 1 RBC is the older, broader measure and is still required by the Basel III framework. Many supervisory triggers (Prompt Corrective Action, stress test thresholds) use Tier 1 RBC, so it remains operationally important even though CET1 is the more conservative number.
What's the minimum Tier 1 RBC?
6% minimum plus 2.5% capital conservation buffer = 8.5% effective floor for most US banks. G-SIBs and Category I-IV banks face additional surcharges.
Sources
- FFIEC Call Report Schedule RC-R
- 12 CFR Part 217 Subpart B (Capital Ratio Calculations)
See Tier 1 RBC across 4,394 US banks
BankRegReports ranks every FDIC-insured institution by Tier 1 RBC, refreshed quarterly within 48 hours of FFIEC release.