EBA · 2024_7147 Rejected question

Inclusion of Interim profits in CET1 ratio at half year

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
26, para. 2
Topic
Own funds
Submitted by
Credit institution
Submitted
2024-07-12
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Question

At the half year, where an institution has accrued for an interim cash dividend in line with its approved dividend policy and the policy also allows for the distribution of excess capital at the discretion of its Board, is the institution also required to deduct for a potential full year share buyback in its half year CET1 ratio where:  (i) its Board has not made any decision on an interim or full year share buyback and its distribution policy does not formally commit the institution to an interim / full year share buyback;  (ii) no share buyback application has been made to the ECB;  (iii) no explicit guidance on the quantum of a share buyback has been given to the market (at either the HY or FY), and therefore undistributed capital is fully available for use in H2 to cover unexpected risk or losses should they occur

Background

Referring to Q&A 2023_6887 which relates to the deduction for a share buyback from an institution’s full year CET1 ratio, where an application for a share buyback to the competent authority has been submitted, but no permission received. The question specifically refers to the HY process and the interpretation of Q&A 2023_6887 with respect to an institutions HY CET1 ratio.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7147

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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