What is the capital of level 1?
level 1 capital concerns the bank's financial health. This type of capital, which is often used by regulatory agencies in developed economies, focuses on determining the solvency of the financial institution. The shares of the ordinary shares are a key measure of the bank's financial strength and is the most commonly used part in calculating the level 1. Its use in the evaluation of the company's financial health is useful because it is a degree of liquid assets that have a clear value and provide security for both regulators and investors.
Technically, capital of level 1 is a measure of the main capital of the bank, which includes its ordinary shares and published reserves. The ordinary shares are the percentage of the company owned by shareholders of a regular warehouse. The published reserves are profits that are generated by the company outside the divide -shaped shareholders' dividend dividend or shares. This capital is also measured in the mathematical equation known to the apome of capital 1 level 1. This calculation is performedBy distributing level 1 capital according to assets weighted by risk or these assets in the balance sheet, such as loans that are measured at the basis of credit risk.
Another way to measure this capital is to consider the investor's share. It is a calculation of the amount paid by the shareholder for obtaining a partial ownership in the bank, which is the price paid for the purchase of shares in combination with profits generated by the bank, except for any losses that could occur. The original amount of investment for each individual share in combination with an increase in value per share is a capital amount for investors.
According to the law, banks are obliged to maintain a certain level of level 1 in the balance sheet depending on the region where the registered office is located. In the United States, this level must be maintained to 4%or more. The ratio of more than 13 percent means that the company is conservative and cautious with its expenditure and capitalreserves.
In some cases, the ratio of level 1 may be a deceptive scale of the company's financial force. This is because, in addition to capital capital and published reserves, there may be other hidden assets that have not been reported in the balance sheet. For example, level 3 assets cannot be appreciated in a direct way. These assets could be a piece of real estate or complex business tools such as derivatives whose values are based on assumptions or expectations. Without adding these assets to the total financial structure of the bank, the real financial health of the institution may be disturbed.