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Bank capital is a loss-absorbing financial cushion: it helps a bank keep operating when loans or other assets lose value. Regulators require banks to hold minimum amounts of qualifying capital, measured through several ratios. The applicable requirement depends on the bank’s size, risk profile, regulatory category and, for some large banks, extra buffers or surcharges. Capital can help protect depositors, but it is not a guarantee of repayment and is not the same as deposit insurance.
What bank capital is and how the ratios work
Capital is the financial resources available to absorb losses while a bank continues its business. It is not simply the cash in a bank’s vault or a separate pool of money assigned to each depositor. The Federal Reserve describes capital as a cushion that can support the institution and protect uninsured depositors and debt holders in a liquidation. A bank’s risks and activities can also justify capital above a regulatory minimum. Federal Reserve: Capital
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A regulatory capital ratio compares a defined measure of qualifying capital with a regulatory measure of the bank’s assets. Risk-based ratios use risk-weighted assets: exposures are adjusted under regulatory rules to reflect their risk. The leverage ratio instead compares Tier 1 capital with a broader measure of assets, after specified deductions. These different denominators give supervisors complementary views of a bank’s ability to absorb losses and its overall balance-sheet leverage. Federal Reserve: Capital
In simplified form, a ratio is qualifying capital ÷ regulatory asset measure. The numerator and denominator depend on the specific ratio, so two percentages are not directly comparable unless you know what each measures.
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Federal Reserve baseline minimum ratios
For institutions covered by the cited Federal Reserve minimum rule, the baseline requirements are:
| Measure | Baseline minimum | What the denominator represents |
|---|---|---|
| Common Equity Tier 1 (CET1) | 4.5% | Risk-weighted assets |
| Tier 1 capital | 6% | Risk-weighted assets |
| Total capital | 8% | Risk-weighted assets |
| Leverage | 4% | Average consolidated assets, after specified deductions |
These are baseline figures under that Federal Reserve rule, not a complete universal requirement for every U.S. bank. Applicability, capital definitions and additional requirements vary with charter, regulator, size and category. Federal Reserve: Capital
Why some large banks have higher requirements
For covered large banking organizations with at least $100 billion in consolidated assets, the Federal Reserve describes the CET1 requirement as a 4.5% common minimum plus a stress capital buffer of at least 2.5%. A global systemically important bank (G-SIB) also has a surcharge where applicable, with a minimum of 1.0%. These components do not establish one threshold that applies to every large bank: the actual requirement is institution-specific. Federal Reserve: Large Bank Capital Requirements
Stress capital buffer
The Federal Reserve’s annual supervisory stress tests assess whether covered banks could absorb losses in severe hypothetical economic and financial scenarios while meeting obligations and continuing to lend. The Fed uses the results to set each bank’s stress capital buffer, publicly discloses bank-level results and runs tests using at least two scenarios. A scenario is a resilience test, not a forecast of what will happen or a guarantee of what a bank can withstand. Federal Reserve: What Are Stress Tests?
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G-SIB surcharge and current bank-specific figures
The surcharge adds a further CET1 requirement for a bank designated as a G-SIB. Because buffers and surcharges vary by institution, use the Federal Reserve’s published 2026 schedule to check an individual large bank’s requirements rather than adding component minimums into a single figure for all banks. Federal Reserve: Large Bank Capital Requirements
What the latest system-wide figures do—and do not—show
In its June 2026 report, the Federal Reserve said that more than 99% of banks were well capitalized in the fourth quarter of 2025. Aggregate CET1 ratios were about 13% for both large and small banks in that quarter. These figures describe groups of banks at a particular time; they do not show whether a named bank meets its own requirements or reveal its individual financial condition. Federal Reserve: Financial Stability Report
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What capital means for depositors
A stronger capital cushion can absorb losses before they exhaust a bank’s resources, helping support continued operations and confidence. That is why capital regulation matters to depositors. But a capital ratio is a regulatory measure—not a promise that a bank cannot fail or that every deposit will be repaid in every resolution. Uninsured depositors do not have the same status as insured depositors in a liquidation. Federal Reserve: Capital
Capital requirements are not deposit insurance
Capital requirements tell a bank how much qualifying loss-absorbing capital it must maintain under applicable rules. Deposit insurance is a separate protection for eligible deposits under FDIC rules. Neither should be treated as a substitute for the other: capital reduces a bank’s vulnerability to losses, while insurance addresses depositor protection under its own terms. For current coverage limits, eligibility and account-ownership rules, consult the FDIC directly at FDIC Deposit Insurance.
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