Tier 1 capital, the more important of the two, consists largely of shareholders' equity and disclosed reserves.

It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock.

When the rules take full effect at the end of 1992, banks will have to back every commercial loan with capital equal to 8% of the loan's value; half of that must be share capital or disclosed reserves ('core' capital).