The European Central Bank (ECB) has published a decision on the conditions under which credit institutions in the single supervisory mechanism are permitted to include interim or year-end profits in common equity tier 1 (CET1) capital in accordance with Article 26(2) of the Capital Requirements Regulation.
Subject to permission by the ECB, Article 26(2) allows for the inclusion of interim profits or year-end profits before a formal decision has been taken by an institution confirming the final profit or loss for the year in CET1 capital. There are two condition that must be met for permission to be granted. Those are that:
- profits have been verified by persons independent of the institution that are responsible for the auditing of the accounts of that institution; and
- the institution has demonstrated that any foreseeable charge or dividend has been deducted from the amount of those profits.
