---
title: "Total Capital: definition, formula, and thresholds"
description: "Total capital is a bank's regulatory capital: tier 1 capital (common equity tier 1 plus additional tier 1) plus tier 2 capital. Banks report it on Call Report Schedule RC-R, Part I. It is not the same as total equity capital, the book net worth on Schedule RC."
canonical_url: https://www.bankregreports.com/glossary/total-capital/
source: BankRegReports
category: "Capital"
units: "$"
schedule: "Schedule RC-R Part I"
---

# Total Capital

> Total capital is a bank's regulatory capital: tier 1 capital (common equity tier 1 plus additional tier 1) plus tier 2 capital. Banks report it on Call Report Schedule RC-R, Part I. It is not the same as total equity capital, the book net worth on Schedule RC.

## Formula

```
Total Capital = Tier 1 Capital + Tier 2 Capital
```

Tier 1 capital is common equity tier 1 (common stock and surplus, retained earnings and, for banks that have not opted out, accumulated other comprehensive income, less regulatory deductions) plus additional tier 1 instruments such as perpetual noncumulative preferred stock. Tier 2 capital is mainly qualifying subordinated debt and the allowance for credit losses up to 1.25% of risk-weighted assets. On Schedule RC-R, Part I, tier 1 capital is RCFA8274, tier 2 capital RCFA5311 and total capital RCFA3792.

## Why it matters

Total capital is the numerator of the total risk-based capital ratio, the broadest of the risk-based capital tests. Under prompt corrective action a bank needs total capital of at least 10% of risk-weighted assets to be well capitalized and 8% to be adequately capitalized. It is the full loss-absorbing cushion regulators count before depositors and the FDIC are exposed.

## How to read it

Read total capital through its two layers. Tier 1 absorbs losses while the bank keeps operating; tier 2 absorbs them mainly after the bank fails. At most community banks tier 2 is little more than the eligible allowance for credit losses, so total capital sits just above tier 1. A bank whose total capital is well above tier 1 leans on subordinated debt. The dollar amount only means something against risk-weighted assets, which is the total capital ratio.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| Ratio ≥ 15% of RWA | Strong | Total capital comfortably above the 10.5% buffer level. |
| 10.5–15% of RWA | Adequate | Well capitalized and clear of the conservation buffer limits. |
| 10–10.5% of RWA | Watch | Well capitalized but inside the buffer, so payouts are limited. |
| < 10% of RWA | Concern | Not well capitalized; below 8% the bank is undercapitalized. |


## Worked example

Wells Fargo Bank, N.A. reported tier 1 capital of $148,541 million and tier 2 capital of $17,741 million for the quarter ended June 30, 2026, for total capital of $166,282 million. Against total risk-weighted assets of $1,231,425 million, that is a total capital ratio of 13.50%, 3.50 percentage points above the 10% well-capitalized line.

## Questions

### What is total capital in banking?

Total capital is the capital a bank may count toward its regulatory requirements: tier 1 capital plus tier 2 capital. It is also called regulatory capital, and banks report it on Call Report Schedule RC-R, Part I.

### Is total capital the same as total equity?

No. Total equity capital is the book net worth on the balance sheet (Schedule RC). Total capital is a regulatory measure: it starts from common equity, deducts goodwill, other intangibles and certain deferred tax assets, and adds tier 2 instruments such as qualifying subordinated debt and part of the allowance for credit losses. The two can be close at a bank with little goodwill, but they are different numbers.

### How is total capital different from the total capital ratio?

Total capital is a dollar amount. The total capital ratio divides it by risk-weighted assets; a bank needs at least 8%, and 10% to be well capitalized.

## Sources

- [FFIEC Call Report Schedule RC-R (Regulatory Capital), Parts I and II](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)
- [12 CFR Part 217 (Federal Reserve capital rule), sections 217.20 and 217.10](https://www.ecfr.gov/current/title-12/part-217)

## Related metrics

- [Total Risk-Based Capital Ratio](https://www.bankregreports.com/glossary/total-rbc/): The total risk-based capital ratio is a bank's total regulatory capital (tier 1 plus tier 2) divided by its risk-weighted assets. US rules require at least 8%, 10% to be well capitalized, and 10.5% including the capital conservation buffer.
- [Tier 1 Capital](https://www.bankregreports.com/glossary/tier1-capital/): Tier 1 capital is a bank's core, going-concern capital: its highest-quality common equity plus additional tier 1 instruments such as perpetual preferred stock. It is the capital that absorbs losses while the bank keeps operating, and it is the numerator of the tier 1 risk-based and leverage ratios.
- [Tier 2 Capital](https://www.bankregreports.com/glossary/tier2-capital/): Tier 2 capital is the second-quality layer of regulatory capital: primarily subordinated debt, qualifying allowance for credit losses, and certain long-dated instruments that absorb losses only on liquidation rather than as a going concern.
- [Common Equity Tier 1 Capital Ratio](https://www.bankregreports.com/glossary/cet1-ratio/): The CET1 ratio is a bank's common equity tier 1 capital divided by its risk-weighted assets. It measures the bank's highest-quality capital (common stock and surplus, retained earnings and, for banks that have not opted out, accumulated other comprehensive income, less regulatory deductions) against its risk-weighted assets. It is the most-watched single capital indicator in US bank supervision after the 2013 Basel III reforms.
- [Total Equity Capital](https://www.bankregreports.com/glossary/total-equity/): Total equity capital is the bank's net worth on a book basis: common stock, surplus, retained earnings, and accumulated other comprehensive income (AOCI). It is the first cushion that absorbs losses before depositors or the FDIC are exposed.
- [Risk-Weighted Assets](https://www.bankregreports.com/glossary/risk-weighted-assets/): Risk-weighted assets (RWA) are a bank's assets and off-balance-sheet exposures, each multiplied by a risk weight set in the capital rules. RWA is the denominator of the CET1, tier 1 and total capital ratios, so it sets how much capital a bank must hold for the risks it takes.

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