CET1pääomaa

CET1pääomaa, or Common Equity Tier 1 capital, is a key metric in banking regulation. It represents the highest quality of capital that a bank can hold. This capital is primarily composed of common shares, retained earnings, and other disclosed reserves. CET1pääomaa is considered "common equity" because it absorbs losses without triggering a bank's insolvency.

The purpose of CET1pääomaa is to ensure that banks have a strong buffer against unexpected losses, thereby protecting depositors and the financial system. Regulatory bodies, such as the European Banking Authority and the US Federal Reserve, set minimum requirements for CET1 ratios. These ratios are calculated by dividing the bank's CET1pääomaa by its risk-weighted assets.

A higher CET1 ratio indicates a stronger and more resilient bank. In the event of financial distress, a bank with substantial CET1pääomaa can absorb losses more effectively, reducing the likelihood of needing a bailout or failing. The Basel III framework, an international regulatory accord, significantly enhanced the requirements for CET1pääomaa following the 2008 financial crisis. Banks are required to hold a certain percentage of their risk-weighted assets as CET1 capital. This focus on high-quality capital is a cornerstone of modern financial stability.