It stands for common equity tier-1 capital; a component of total Tier 1 capital that includes the core capital that a bank holds in its capital structure. CET1 capital is the capital of a bank or financial institution that consists of paid-in capital, capital reserve, surplus reverse, general reserve, undistributed profits (retained earnings), eligible portion of minority interests (non-controlling interests), etc. Common equity tier 1 capital (CET1) is the highest grade of a bank’s regulatory capital, as it has the ability to absorb losses instantly as/ when they arise. Additional tier 1 capital (AT1) is also a loss absorbent on a going-concern basis. However, AT1 instruments do not meet all the criteria for classification as part of CET1.

Differently stated, CET1 is the sum of common shares (or its equivalent), stock surplus, retained earnings, other comprehensive income (OCI), qualifying non-controlling interests and regulatory adjustments.

Common equity tier-1 capital is part of tier-1 capital (which consists of common equity tier-1 capital plus additional tier-1 capital).