Common Equity
Ownership capital held by common shareholders.
Definition
Common equity represents the total ownership stake of common shareholders in a company. It includes the par value of common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income. It excludes preferred stock and noncontrolling interests.
Why It Matters
Common equity is the purest form of loss-absorbing capital and forms the foundation of the CET1 ratio. The growth of common equity through retained earnings is a primary way banks build capital organically.