Capital
Total Risk-Based Capital Ratio
Also known as Total RBC
The Total Risk-Based Capital ratio measures a bank's total qualifying capital — Tier 1 plus Tier 2 instruments — against its risk-weighted assets. It captures both going-concern and gone-concern loss absorption.
Formula
Tier 2 capital includes subordinated debt with at least five-year maturity, qualifying allowance for credit losses (capped at 1.25% of RWA), and certain hybrid securities. Tier 2 instruments absorb losses in resolution but not as a going concern.
Why it matters
Total RBC sets the broadest regulatory floor on capital. The minimum is 8% plus the 2.5% conservation buffer (10.5% effective floor). Banks that issue subordinated debt commonly show Total RBC ratios 100–200bp above their Tier 1 RBC.
How to interpret
A wide gap between Total RBC and Tier 1 RBC (>200bp) signals heavy reliance on subordinated debt — which is cheaper than equity but creates resolution complexity. Most community banks show a 50–150bp gap from limited subordinated debt issuance.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 15% | Well capitalized | Comfortable buffer above 10.5%. |
| 12–15% | Adequate | Normal range for US community banks. |
| 10.5–12% | Watch | Approaching conservation buffer. |
| < 10.5% | Concern | Inside or below the buffer. |
Worked example
Frequently asked
Why is the allowance for credit losses capped at 1.25% of RWA in Tier 2?
The cap prevents banks from inflating regulatory capital by building unnecessarily large loan loss reserves. The 1.25% threshold is a Basel III standard.
Does Total RBC include trust preferred securities?
Most legacy trust preferred securities issued before 2014 were grandfathered as Tier 1 or Tier 2 capital but are now being phased out. New issuance does not qualify.
Sources
- FFIEC Call Report Schedule RC-R
- 12 CFR Part 217
See Total RBC across 4,394 US banks
BankRegReports ranks every FDIC-insured institution by Total RBC, refreshed quarterly within 48 hours of FFIEC release.