UK PRA expectations on notification for inclusion of interim or year-end profits in CET1 capital

The UK Prudential Regulation Authority (PRA) has published a new webpage outlining its expectations of firms' when including interim or year‑end profits in Common Equity Tier 1 (CET1) capital. 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 CET1 capital, unless a formal decision has been taken confirming the final profit or loss for the year (e.g., by the board or AGM). Losses must be deducted in full as soon as they are incurred and do not require notification.

When notifying, firms are expected to demonstrate that profits have been independently verified and that any foreseeable charge or dividend has been deducted. Notifications must specify whether they apply on an individual basis, a consolidated basis, or both. The PRA emphasises that receipt of a notification does not constitute approval of CET1 eligibility and firms themselves remain responsible for compliance with all applicable requirements regarding the quality of capital. If any information provided changes, firms must inform their PRA supervisory contact and submit a new notification as soon as possible. Firms are also reminded to notify the PRA each time they wish to count interim or year-end profits as CET1 capital in a financial year.

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