First class capital

Overview

level capital includes core first-level capital and other level capital.

The core level first capital includes:

(1) to receive capital or ordinary shares.

(b) capital reserve.

(3) surplus reserve.

(4) General risk preparation.

(fifth) unallocated profits.

(6) Minority shareholder capital can be included in the part.

Other levels of capital include:

(1) Other levels of capital tools and its premium.

(b) Minority shareholder capital can be included in the part.

The first class must account for more than 50% of the total bank capital.

Tier 2 Capital is also known as the affiliate capital, is an indicator of the state of capital sufficient bank, and is mixed by non-public reserves, assets to reserve, ordinary reserve, (credit / equity) mixed capital. Tools and secondary long-term bonds. Due to the existence of a clear risk, the credit rating of the secondary bond is lower than the advanced bonds issued by the same issuance.

Source

The source of core capital includes issuing common stock, increasing retaining profits.

Bank effect

Supplementary core capital is the most fundamental means of commercial banks to improve the risk of anti-risk: the regulatory layer does not relax the conditions for issuing subordinate debts, and subordinate debt Directly related to core capital, the higher the core capital, the larger the space of the distribution subordinate supplement subsidiary capital, so supplementing core capital is the most fundamental means of commercial banks to improve the risk of anti-risk. This is also the reason why the core capital is abundant listed city is almost unaffected by this new regulations. And we also believe that 7% of the core capital adequacy ratio has become the actual CCAR standard.

The ultimate impact on commercial banks is reflected in the decrease in leverage, but long-term ROE does not necessarily decrease: after we estimate, maintain the current 10% capital adequacy standard unchanged, accounting for debt instruments of subsidiary capital The proportion is reduced by 50% to 25%, which will make the industry's maximum lever multiple to about 23 times, and the decline in the leverage will result in a long-term ROE level. But we should also see that commercial banks have vigorously developed intermediate business that does not consume capital and develops more capital-consuming retail services to effectively improve ROA, and long-term ROE levels do not necessarily decrease with the decrease of leverage. In addition, the bank's asset structure adjustment space is still very large, so reducing risk weight is also an important way to improve capital adequacy.

Calculating Formula

core capital adequacy ratio = (Total core capital / weighting risk assets) × 100%

"Basel Agreement", signing the country Bank's capital adequacy ratio requires 8%, that is, the bank's lowest capital limit is 8% of bank risk assets. The core capital adequacy ratio is 5%, which is less than 5% of risk assets.

Composition

Core capital is self-funded in financial institutions that can be permanently used and dominated, which constitutes the following:

(1) Receive capital. Received capital refers to ordinary stocks and permanent non-accumulated preferred stocks that have been issued and fully paid, which is a permanent shareholders' equity. Including national capital, legal capital, personal capital, foreign capital

(2) capital reserve

(3) surplus reserve

(4) unallocated profit. The net profit achieved by enterprises has made up for losses, extracting surplus reserve and remembering the profits of enterprises after distributing profits to investors.

(5) public reserves. Including stock issuance premium, retaining profits, general reserve and statutory value added.