# Tier 1 Capital

*Banking & Payments — Finicade finance glossary*

Tier 1 capital is a bank's highest-quality loss-absorbing capital, dominated by common equity and retained earnings. Common Equity Tier 1 is the strictest measure and the one markets watch. The critical property is that it absorbs losses while the bank is still operating, unlike debt-like instruments that only help once it has failed — the distinction 2008 made painfully clear.

**Also known as:** CET1, common equity tier 1, core capital

**Related terms:** [Capital Adequacy Ratio](https://finicade.com/glossary/capital-adequacy-ratio), [Basel Rules](https://finicade.com/glossary/basel-rules), [Bank Leverage](https://finicade.com/glossary/bank-leverage), [Shareholders' Equity](https://finicade.com/glossary/shareholders-equity), [Stress Testing](https://finicade.com/glossary/stress-testing)

Source: https://finicade.com/glossary/tier-1-capital