Pillar 1
Pillar 1 (Minimum Capital Requirements)
Definition
The first pillar of the Basel framework establishing minimum capital requirements for credit risk, market risk, and operational risk. Pillar 1 defines the calculation methodologies (standardised and internal models approaches) and minimum ratios that banks must maintain for Common Equity Tier 1, Tier 1, and Total Capital.
Regulatory Context
Pillar 1 requirements are legally binding and apply uniformly across all banks within a jurisdiction. The Basel III reforms introduced the output floor, which limits the benefit banks can derive from internal models relative to the standardised approach.