// definition
CET1
Common Equity Tier 1 capital
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Short definition
The highest-quality regulatory capital, including common shares and retained earnings after prudential adjustments. The CET1 ratio divides that amount by risk-weighted assets; capital and its ratio are distinct measures.
risk atlas
Knowledge map
Intuition
A bank can record loan losses and still have a high CET1 ratio when earnings, provisions and capital absorb them. The ratio says how much hard capital remains relative to measured risk.
Formula
CET1 ratio = CET1 capital / risk-weighted assetsWhy it matters now
France can report rising business failures while its largest banking groups retain a 15.6% aggregate CET1 ratio because case counts and bank capital use different denominators.
Related analyses
- Where do the losses from 70,803 French business failures go?Firm size, recoveries, guarantees and the final creditor.
- Held to maturityUnrealised securities losses and the limits of regulatory capital.
Related guides
- Reading bank healthCapital, liquidity, asset quality and earnings.
- Reading bank stress testsProjected losses, revenue and capital under severe scenarios.
Primary sources
- Basel Committee on Banking SupervisionInternational definitions and minimum capital framework.
- European Banking AuthorityComparable European bank capital and asset-quality indicators.