Allocations to the funds for general banking risk

Can banks allocate items to their funds for general banking risk without waiting for the annual accounts? If yes, is Art. 26 (2) CRR applicable for allocations during the financial year?

BaFin only allows allocations to the funds for general banking risks once a year on the basis of the annual accounts and no allocations during the financial year. The reason for this approach is to ensure that all losses have been taken into account and that independent auditors have approved the allocation. BaFin considers the funds for general banking risk to be a so-called static component of own funds that can only be adjusted on the basis of the audited annual accounts. Contrary to this approach, another competent authority has allowed in one concrete case allocations to the funds for general banking risks without any proof by auditors/accountants although the bank has asked for a permission in line with Art. 26 (2) CRR (e.g. with an auditor’s verification of the interim allocation and the deduction of any foreseeable charges and dividends).To ensure a consistent approach in the EU, EBA should clarify if and how (interim) allocations to the funds for general banking risk are possible. There are basically three options: Option 1: Allocations to the funds for general banking risk are possible at any time and without any restrictions and permissions by the competent authority. Option 2: Interim allocations to the funds for general banking risk are permissible in line with Art. 26 (2) CRR. The bank has to ask for permission according to the proceedings foreseen by the CRR for inclusion of interim profits. Option 3: No interim allocations to the funds for general banking risks are allowed. Art. 26 (2) CRR only applies to interim profits.