Capital
Total Capital
Also known as Regulatory Capital, Total Regulatory 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.
How is total capital calculated?
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.
- Take tier 1 capital from Schedule RC-R, Part I.
- Add tier 2 capital from the same schedule. The sum is total capital.
- To get the total capital ratio, divide total capital by total risk-weighted assets from Schedule RC-R, Part II.
Worked example
Source: FFIEC Call Report, Schedule RC-R, quarter ended June 30, 2026: tier 1 capital (RCFA8274), tier 2 capital (RCFA5311), total capital (RCFA3792) and total risk-weighted assets (RCFAA223), as served on the bank's regulatory capital page.
Why does total capital matter?
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.
Total capital is not the book figure. A bank's net worth on its balance sheet is total equity capital, reported on Schedule RC; total capital starts from equity, removes goodwill and other deductions, and adds tier 2 instruments.
How do you interpret total capital?
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.
What do Total Capital levels indicate?
| Range | Label | Interpretation |
|---|---|---|
| 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. |
Frequently asked
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
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