CET1pääoman

CET1pääoman, which translates to Common Equity Tier 1 capital, is a crucial measure of a bank's financial strength. It represents the highest quality form of regulatory capital available to banks. This capital serves as a buffer against unexpected losses, ensuring that a bank can absorb financial shocks without failing.

The components of CET1pääoman are primarily common shares and retained earnings. This means it consists of equity that is permanently available to the bank and can absorb losses without triggering bankruptcy. Other elements like certain preferred shares and additional paid-in capital may also be included, subject to specific regulatory definitions. Regulatory bodies, such as those in the European Union, have stringent rules on what qualifies as CET1pääoman.

Banks are required to maintain a minimum ratio of CET1pääoman to their risk-weighted assets. This ratio, known as the CET1 ratio, is a key indicator monitored by regulators and investors. A higher CET1 ratio generally signifies a more resilient bank, better equipped to withstand economic downturns and credit losses. The Basel III framework, an international regulatory accord, significantly enhanced the requirements for CET1pääoman and related ratios to improve the stability of the global banking system following the 2008 financial crisis. Changes in CET1pääoman can impact a bank's ability to pay dividends, undertake share buybacks, and pursue growth strategies.