Deduction of deferred tax assets

Regarding the phasing-in percentages established in Article 478(2) of the CRR, how should the deduction amount  be calculated during the transitional period when part of the stock of DTAs existed prior to 1 January 2014?

Regarding the deduction of DTAs from CET1, as established in Article 36 (c) of the CRR, Article 478 establishes the range of phasing-in percentages that the competent authority should consider when determining the applicable percentage in each year. In the case of credit institutions directly supervised by the ECB, the applicable percentages are defined in Article 19 of the ECB Regulation 2016/445. Regarding the calculation of the DTAs deduction amount during the transition period, when the stock of DTAs is composed by DTAs recognised before and after 1 January 2014, it is important to clarify which approach should be applied. Below, an example is presented: Institution A has a stock of EUR 200M of DTAs that depend on future profitability and existed prior to 2014 and EUR 400M of DTAs that also depend on future profitability but were recognised after 1 January 2014. The threshold calculated in accordance with Article 470 amounts to EUR 400M, meaning that the stock of DTAs subject to deduction corresponds to EUR 200M (for the purpose of this example the second threshold – 15% - is being disregarded). There are 3 possibilities for the calculation of this deduction: - Weighted approach: 33,33%*200*[phasing in % for DTAs prior 2014]+66,66%*200*[phasing in % for DTAs after 2014]; - “FIFO”: 200*[phasing in % for DTAs prior 2014]; - “LIFO”: 200*[phasing in % for DTAs after 2014].