Common Equity Tier 1 (CET1) capital ratio is a measure of a bank’s financial strength and ability to withstand financial stress. It is one of the components of the Basel III capital framework, which is a set of international standards for bank capital adequacy, stress testing, and liquidity risk management.
Discount window borrowing is a lending facility a central bank provides to commercial banks that need short-term funding to meet their liquidity needs. The discount window is a tool that allows banks to borrow money directly from the central bank, typically at a discount rate that is lower than the prevailing market rate.
Fractional reserve banking (FRB) is a regulatory system in which banks hold at least a specific fraction of their customers’ deposits in reserve and lend out the rest. When a bank accepts customer deposits, it must keep a certain percentage of those deposits in reserve, typically held at that country’s central bank.
An Exchange-Traded Fund (ETF) is an investment security that combines the features of both mutual funds and stocks. Like mutual funds, ETFs pool money from a group of investors to buy a basket of assets or securities, such as stocks, bonds, or commodities. However, unlike mutual funds, ETFs trade on an exchange, similar to individual stocks.
