Tier 1 Capital Adequacy Ratio
The Tier 1 Capital Adequacy Ratio is the comparison between a banking firm's core equity capital and its total risk-weighted assets. A firm's core equity capital is known as its tier 1 capital and is the measure of a bank's financial strength based on the sum of its equity capital and disclosed reserves, and sometimes non-redeemable and non-cumulative preferred stock. A firm's risk-weighted assets include all assets that the firm holds that are systematically weighted for credit risk.
Calculated as: Tier 1 Capital / Risk Weighted Assets