Notification for inclusion of interim or year-end profits in Common Equity Tier 1 capital

We require notification from some firms we regulate if they intend to include interim or year-end profits in Common Equity Tier 1

When to submit an Inclusion of interim or year-end profits notification

Under Article 26(2), Chapter 3 of the Own Funds (CRR) Part of the PRA Rulebook, firms must notify the PRA, as soon as practicable, when including interim or year-end profits in Common Equity Tier 1 (CET1) capital, unless a formal decision has already been taken confirming the final profit or loss for the year.

A notification is required only if:

  • Profits are being included in CET1; and
  • A formal decision confirming the final profit or loss has not yet been made.

Firms must ensure the notification aligns with the criteria set out in Article 26(2).

A notification is not required:

  • If a formal decision has been made, confirming the final profit for the year (e.g. by the Board or AGM).
  • For losses, whether interim or final, as they must be deducted in full as soon as they are incurred.

The requirement to notify depends on the firm’s internal governance and the timing of the formal decision. Firms should assess their own decision-making processes to determine whether a notification is necessary under Article 26(2).

What to send to us

Inclusion of interim or year-end profits

Firms submitting an interim or a year-end profit notification are required to demonstrate that the following conditions set out in Article 26(2) are met:

  • those profits have been verified by persons independent of the firm that are responsible for the auditing of the firm’s accounts; and
  • the firm has ensured that any foreseeable charge or dividend has been deducted from the amount of those profits.

Firms should make it clear in their notification as to which of the three following possible bases they are notifying:

  • Individual basis only;
  • Consolidated basis only; or
  • Individual and consolidated bases.

Firms need to notify the PRA each time they wish to count interim or year-end profits as CET1 capital in a financial year.

Firms must notify us by sending us a completed:

  1. Inclusion of interim or year-end profits notification form to CRRFirms.regulatorycapital@bankofengland.co.uk
  2. A profit verification letter by persons independent of the institution that are responsible for the auditing of the accounts of the firm.

Is the notification a form of PRA approval?

The PRA will not provide, nor should we be deemed to be providing, approval (whether explicit or implicit) of the eligibility for inclusion of interim or year-end profits in the CET1 capital. Firms shall continue to be responsible for ensuring that the inclusion of the interim or year-end profits comply with all relevant rules and our expectations regarding the quality of capital.

What happens if the information provided in the notification changes?

If the information provided in the notification changes, firms must inform your PRA supervisory contact and submit a new notification form as soon as possible. 

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