A category of equity (of an entity, e.g., an Islamic financial institution, IFI) that represents subordinated claims on an entity’s assets (residual interest) that are perpetual in nature, and not callable by the issuer (the issuing entity), except in certain cases where an entity may have a discretionary buy-back arrangement under certain regulations).

Tier-1 equity is the core measure of an entity’s financial strength from a regulatory perspectives. It is part of core capital, which mainly consists of common stock and disclosed reserves, but may also include non-redeemable non-cumulative preferred stock.