HSBC Holdings had the highest tier 1 capital of all banks in Europe in 2023, with roughly 130.65 billion euros. It was followed by BNP Paribas and Banco Santander, with around 107.5 and 85.5 billion euros, respectively. Tier 1 capital displays the financial strength of a bank as it shows the bank’s core capital, including equity capital and disclosed reserves. Regulators use tier 1 capital for the purpose of ensuring that banks have enough capital in case of unexpected losses. The tier 1 capital level of HSBC in 2023 was among the highest in the world that year, but well below the one of ICBC, the bank with the highest tier 1 capital in the world.
What is the tier 1 capital ratio minimum?
After the financial crisis in 2008, it became clear that many banks were running on too much debt and did not hold enough equity. To prepare the banking industry for other financial crises, Basel III accords were implemented. The framework, developed on top of Basel II, requires banks to have a tier 1 capital ratio of a minimum six percent.
European banks appear safe for now
In 2023, all but one European banks reviewed passed the EU-wide stress test. The EU-wide stress test is run to assess Europe’s banking sector's ability to withstand shocks to the market and to ensure a repeat of the financial crisis does not happen again. The test, which requires banks to have a ratio of over 5.5 percent for fully loaded CET1 capital, saw Europe’s 48 largest banks score anywhere between 0.05 percent to almost 25 percent.
