Inclusion of interim profits in CET1

On the basis of Article 26(2) of Regulation (EU) No 575/2013 (CRR) an institution may include interim profits in CET1 capital before it has taken a formal decision confirming the final profit or loss of the institution for the year only with the competent authority’s prior permission, and subject to the conditions set out in a) that those profits have been verified by persons independent of the institutions that are responsible for the auditing of the accounts of that institution and b) the institution has demonstrated to the satisfaction of the competent authority the deduction of any foreseeable charge or dividend from the amount of those profits. Additional conditions are included in Articles 2 and 3 of Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions. If all abovementioned conditions are met, the institution from the example above, will be able to include the additional interim profits from Q1 and Q2 into CET1 capital, even if its Q3 profits may still not be calculated or audited. In case of losses occurring in Q3, such losses would be immediately deducted from CET1 capital on the basis of Article 36(1)(a) CRR.