Finance Formulas / July 9, 2018 / Aniyah Booth
To force banks to increase capital buffers, and ensure they can withstand financial distress before they become insolvent, Basel III rules would tighten both tier-1 capital and risk-weighted assets (RWAs). The equity component of tier-1 capital has to have at least 4.5% of RWAs. The tier-1 capital ratio has to be at least 6%. Basel III also introduced a minimum leverage ratio, with Tier-1 capital must be at least 3% of total assets, and more for global systemically important banks that are too big to fail. The Basel III rules have yet to be finalized due to an impasse between the U.S. and Europe.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders. Distribution to shareholders may be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase.
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