An entity asking for prior permission for the inclusion of interim or year-end profits in CET1 capital should submit such a request complemented with the required additional documents at least 7 complete business days* before the date at which it intends to use the CET1 capital including those interim or year-end profits. The documented request should be submitted to De Nederlandsche Bank N.V. (DNB) by email to DNB-LSIfirstname.lastname@example.org.
This Q&A concerns the inclusion of interim or year-end profits as referred to by the Capital Requirements Regulation (CRR), specifically CRR.26.2. DNB applies a similar policy as foreseen by the ECB in its Decision of 4 February 2015 (https://www.bankingsupervision.europa.eu/legalframework/ecblegal/date/2015/html/index.en.html). Two exceptions with regard to the ECB policy are applicable under DNB’s policy as embedded in this Q&A:
- DNB expects a submission of the documented request at least 7 business days before the date of use (the ECB expects 3 business days)
- DNB does not accept a comfort letter as an acceptable form of the “audit letter”
The documented request must include the following items:
- § a “signed CFO letter” in which the CFO or anyone authorized by him/her requests prior permission to include interim profits minus any dividends and/or foreseeable charges in CET1 capital.
- an “audit letter” in which the external auditor confirms that the interim or year-end profits (including amount) have been verified (at least reviewed) for the relevant period.
Verification by the external auditor
DNB recognizes two levels of verification for the purpose of verified within the meaning of the CRR, namely:
- a full scope audit statement
- a review engagement under the stardards of the NBA, notably ISA/COS 2400 or 2410 based on the prudential scope of consolidation, or including a reconciliation to the prudential scope of consolidation if the scope differs.
The third level of verification (a comfort letter) as currently adopted by the ECB, will only be allowed as a way of verification by the external auditor for the interim profits Q1 2015. After Q1, DNB does not recognize a comfort letter as a verification anymore.
Scope of application of this procedure
This answer only applies to a credit institution (CI) classified as a Less Significant Institution (LSI) under the Single Supervisory Mechanism (SSM). Supervised entities classified as a Significant Institution (SI) including entities belonging to a group which is classified as such, should follow the procedures set out by the SSM. For factual information on the determination of interim or year-end profits and the inclusion of those in CET1 capital we refer to the factsheet
* concerning Q1 2015the submission of the documented request is permitted, until 3 business days before the date at which the institution intends to use the CET1 capital including those interim or year-end profits