Banking CET1 ratio

 The CET1 ratio (Common Equity Tier 1 ratio) measures a bank's core liquid capital against its total risk-weighted assets. It serves as a key indicator of a bank's financial strength and solvency, showing how well it can handle sudden financial losses. [1, 2]

Formula and Definition

Numerator (CET1 Capital): The highest quality of regulatory capital, mainly common stock and kept earnings.
Denominator (Risk-Weighted Assets): Total assets adjusted for risk levels (like cash at 0% risk versus risky loans).
The Formula: \(\text{CET1 Ratio} = \frac{\text{CET1 Capital}}{\text{Risk-Weighted Assets}}\) [1, 2]

Requirements and Standards

Global Minimum: The international Basel III rules set a baseline minimum standard of 4.5% for the CET1 ratio.
Local Standards (Australia): The Australian Prudential Regulation Authority (APRA) requires domestic major banks to maintain a higher benchmark of 10.25% to ensure they remain unquestionably strong.
Safety Meaning: A higher percentage means the bank has more safety cushion and a lower chance of failing during a financial crisis. [1, 2, 3]


===================================================
2026
Australia’s major banks maintain strong Common Equity Tier 1 (CET1) capital ratios, averaging 12.1% to 12.2% across the sector. All four major institutions operate comfortably above the Australian Prudential Regulation Authority's (APRA) baseline regulatory minimum requirement of 10.25%. [1, 2, 3]
Bank-by-Bank CET1 Ratios
Westpac (WBC): Reports the highest ratio among the big four at 12.4%, tracking well above its normal operating target of 11.25%. [1]
ANZ: Recorded a strong increase to 12.39% following positive capital generation through the early part of the year. [1]
National Australia Bank (NAB): Stands at 11.65%, which increases to a pro forma 12.05% after accounting for dividend reinvestment plan (DRP) capital actions. [1]
Commonwealth Bank of Australia (CBA): Reports a Level 2 CET1 ratio of 11.6%, balancing solid internal earnings generation against risk-weighted asset movements and dividend payments. [1, 2]
Sector Context & Regulatory Requirements
APRA Minimums: The regulatory minimum CET1 requirement sits at 10.25% for major domestic systemically important banks (D-SIBs). [1, 2]
Capital Buffer: Sector performance highlights strong individual buffers, with collective holdings providing robust protection against credit quality shifts or economic uncertainty. [1]
Framework Evolution: Total capital rules continue to tighten under loss-absorbing capacity mandates, pushing banks to favor efficient Tier 2 capital structures alongside core CET1 stability


----------------------------
At 30 June 2026, Macquarie Bank Group's APRA Basel III Common Equity Tier 1 (CET1) capital ratio was 13.8 per cent (Harmonised: 18.9 per cent), increasing from 12.8 per cent (Harmonised: 17.5 per cent) reported at the end of the financial year on 31 March 2026. These levels comfortably exceed the Australian Prudential Regulation Authority (APRA) regulatory minimum requirement of 9.0 per cent