- Risk-based capital requirements are the minimum capital requirements for banks set by regulators.
- There is a permanent floor for these requirements - 8% for total risk-based capital (Tier 2) and 4% for risk-based Tier 1 capital.
- Tier 1 capital includes ordinary shares, reserves, retained earnings and certain preferred shares.
- Risk-based capital requirements act as an airbag to protect the company from insolvency.