CET1 Ratio
Common Equity Tier 1 capital divided by risk-weighted assets. CET1 is the purest form of bank capital -- common stock plus retained earnings, the equity that absorbs losses first when something goes wrong. The Basel III regulatory floor is 4.5 percent, plus bank-specific buffers (typically pushing the effective minimum to 8-11 percent). When a banks CET1 ratio falls below the regulatory floor plus buffer, dividends and buybacks get restricted automatically; further declines force the bank to either issue dilutive equity or shrink lending.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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