CET1
Definition
Common Equity Tier 1. The highest quality component of a bank's regulatory capital.
What This Actually Means
Your core equity capital — ordinary shares, retained earnings, and qualifying reserves. It's the capital base against which the EVE SOT threshold is measured. When regulators say your EVE change must not exceed 15% of Tier 1, CET1 is the dominant component of that denominator.
Where It Matters
CET1 is the anchor for nearly every regulatory ratio. For IRRBB, it matters because the SOT is expressed as a percentage of Tier 1 capital. A bank with strong CET1 has more headroom before breaching the SOT — the same EVE sensitivity is a smaller percentage of a larger capital base.
Abbreviation CET1 Common Equity Tier 1
A bank's highest-quality capital. The denominator in the EVE SOT threshold.