Contents of C03, row 0220 (Surplus(+)/Deficit(-) of CET1 capital considering the requirements of Article 92 CRR and 104a CRD)

The instructions for this memo item in C03 in Annex 2 of the ITS on Reporting (Regulation (EU) 451/2021) would need some clarification if one of the conclusions of Q&A 2016_2552 is considered.

Let us consider an institution where P2R is 2.5%, CET1 ratio is 10% and which has 3% AT1 instruments. According to the instructions for this cell, “this item shows, in absolute figures, the amount of CET1 capital surplus or deficit relating to the requirements set in point (a) of Article 92(1) CRR (4,5%) and Article 104a CRD, to the extent that the requirement of Article 104a CRD has to be met with CET1 capital. Where an institution has to use its CET1 to meet its requirements of Article 92(1) point (b) and / or (c) CRR and / or Article 104a CRD beyond the extent to which the latter has to be met with CET1 capital, the reported surplus or deficit shall take this into account. This amount reflects the CET1 capital available to meet the combined buffer requirement and other requirements.” Therefore, in the example: CET1 requirements to be met with CET1 items: 4.5% + 2.5%*0.5625 = 5.91% Other T1 requirements, to be met with AT1 items: MIN(1.5% + 2.5%*0.1875, 3%) = 1.97% T1 requirements to be met with CET1 items: 1.5% + 2.5%*0.1875 – 1.97% = 0% Other TC requirements, to be met with AT1 or T2 items: MIN(2% + 2.5%*0.25, 3% - 1.97%) = 1.03% TC requirements to be met with CET1 items: 2% + 2.5%*0.25 – 1.03% = 1.59% Amount of CET1 available to meet further CET1 requirements: 10% - 5.91% - 0% - 1.59% = 2.5% On the other hand, Q&A 2016_2552 states that “in case an institution has a shortfall of AT1 or Tier 2 capital to meet its total own funds requirements, this shortfall should be covered by CET1 capital.” Therefore, in the example (using the terms of the Q&A): CET1 requirements to be met with CET1 items: 4.5% + 2.5%*0.5625 = 5.91% “AT1 requirements” to be met with AT1 items: MIN(1.5% + 2.5%*0.1875, 3%) = 1.97% “Shortfall of AT1 capital” = 1.5% + 2.5%*0.1875 – 1.97% = 0% “T2 requirements” to be met with T2 items: MIN(2% + 2.5%*0.25, 0%) = 0% “Shortfall of T2 capital” = 2% + 2.5%*0.25 – 0% = 2.62% Amount of CET1 available to meet further CET1 requirements: 10% - 5.91% - 0% - 2.62% = 1.47%