Common Equity Tier 1 (CET1) is a crucial regulatory capital measure for banks, representing the core capital that primarily consists of common shares and retained earnings, which acts as a buffer against financial distress. It is used to assess a bank's financial strength and stability, ensuring that it can absorb losses and protect depositors without requiring external assistance.

Common Equity Tier 1

CET1

regulatory capital measure

Core capital refers to the primary funding sources of a financial institution, primarily consisting of common equity and retained earnings, which serve as a buffer against unexpected losses. It is crucial for maintaining financial stability and meeting regulatory capital requirements, ensuring the institution's resilience in adverse economic conditions.

core capital

common shares

Retained earnings are the cumulative profits a company has reinvested in the business rather than distributing to shareholders as dividends. They reflect the company's ability to generate profit and reinvest in growth, impacting its financial health and future potential.

retained earnings

buffer against financial distress

financial strength

Financial stability refers to a condition in which the financial system, comprising banks, financial markets, and other financial institutions, operates efficiently and is capable of withstanding shocks without significant disruption. It is essential for sustainable economic growth, as instability can lead to crises that have widespread negative impacts on economies and societies.

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