what is the tier 1 capital ratio 
the term tier 1 capital ratio refers to the ratio of a bank s tier 1 or core capital financial institutions must meet a certain ratio to ensure their financial stability tier 1 capital is the minimum amount that a bank must hold in its reserves to finance its banking activities this ratio measures a bank s core equity capital against its total risk weighted assets tier 1 capital is comprised of a bank s common stock retained earnings accumulated other comprehensive income aoci noncumulative perpetual preferred stock and any regulatory adjustments to those accounts tier 1 capital ratio formula