Question ID
2014_1242
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
26
Paragraph
2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
-
Name of institution / submitter
Hrvatska narodna banka
Country of incorporation / residence
Croatia
Type of submitter
Competent authority
Subject matter
Inclusion of interim profits in CET1
Question

If a credit institution includes interim profits in Common Equity Tier 1 capital (with the prior permission from the competent authority in accordance with Article 26(2) of the CRR), can the institution decide that in the following interim period it will not apply for a permission concerning interim profits for that (current) interim period, but to use the (previously permitted) amount of interim profits for the previous interim period? For example, a credit institution received a prior permission from the competent authority and included interim profits reported on 30 June in its CET1 capital. When calculating CET1 capital on 30 September, can it choose not to apply for a prior permission from the competent authority to use interim profits reported on 30 September and, instead, include the amount of interim profits reported on 30 June (the same amount it has included in the calculation in the previous quarter)?

Background on the question

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Submission date
Final publishing date
Final answer

Where an institution, having received permission from its competent authority, includes verified interim profits in its calculation of Common Equity Tier 1 (CET1) capital pursuant to Article 26(2) of Regulation (EU) No 575/2013 (CRR), the amended CET1 amount is the amount to be considered for subsequent periods. To the extent that an institution chooses not to have the interim profits (or year-end profits) of the following period verified in accordance with Article 26(2) of the CRR, the institution will not able to include any positive differences in CET1.

In contrast, any interim losses that were to occur subsequent to verification would nevertheless have to be deducted as they arise pursuant to Article 13(1) of the Commission Delegated Regulation (EU) No 241/2014.

Following the example above, the previously verified and approved interim profits per its calculation of 30 June will still form part of CET1 capital on 30 September. However, any positive differences in interim profits as of 30 September (compared to 30 June), to the extent that they are unverified, would however have to be disregarded, whereas negative differences as of 30 September (again compared to 30 June), will have to be deducted as they arise. Furthermore, the calculation of positive or negative differences in interim profits should take account of any foreseeable charges and dividends.

See Q&A 384 for further information.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

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