Why is Core Capital Necessary ?
Core Capital is also termed as Tier 1 capital since without Core Capital, a savings bank or thrift bank cannot survive. After the fiscal disaster of 2008, banks were regulated thoroughly since due to inadequacy of Core Capital, many banks collapsed and their customers went bankrupted as well. People faced heavy losses as the financial institutions offered heavy amounts in form of loan to the borrowers without giving much attention of keeping the bare minimum amount secured that was necessary to keep its customers safe. This led widespread bankruptcy and hence strict regulations are levied on banks for maintaining the Core capital to safeguard customer interest.
Core Capital is one of the most important aspects of banking institutions since without proper Core Capital, a bank cannot function in its desired state as it will not qualify for offering loans to individuals and firms.