3 new Q&As regarding issues relating to the CRR and the CRD

EBA has published 3 new Q&As regarding issues relating to the CRR and the CRD:
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2023_6885 – Own funds – Share buyback program: amount of upfront deduction
QUESTION: Does the upfront deduction under Article 28(2) of Commission Delegated Regulation (EU) No 241/2014 as specified by Q&A 3277 include in addition to CET1 instruments and related share premium accounts also the other CET1 items that are reduced by a share buyback program authorized pursuant to Article 78(1)(b) CRR?
ANSWER: The answer clarifies that the upfront deduction should include not only CET1 instruments and related share premium accounts but, also other CET1 items reduced by a share buyback program. Institutions are required to submit information on the maximum amount they intend to spend on the share buyback program, and this amount must be deducted upfront from the corresponding CET1 items when permission is granted.
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2023_6807 – Interest Rate Risk for Banking Book (IRRBB) – Application of the behavioural assumption of a 5-year cap for non-maturity deposits
QUESTION: Regarding paragraph 111 of the Guidelines on Interest Rate Risk in the Banking Book (EBA/GL/2022/14), and in relation to Article 98(5a) of the CRD, could you please confirm that the behavioural assumption of a 5-year cap on the average repricing of non-maturing deposits should not be understood as a modelling requirement neither for the Supervisory Outlier Tests (SOT) nor for the ongoing management of interest rate risk, but as an alternative and additional measure of interest rate risk that complements the existing IRBB management framework?
ANSWER: The answer clarifies that the 5-year cap is not a modeling requirement for the SOT or ongoing management, but an additional measure of interest rate risk. The application of the 5-year cap is confined to interest rate-sensitive instruments in the banking book, and institutions are expected to comply with it, unless they can demonstrate unintended effects based on their specific business model.
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2023_6886 – Own funds – Calculation of average dividend pay-out ratio under Article 2(7)(a) of Regulation (EU) No 241/2014
QUESTION: How is the average pay-out ratio calculated according to Article 2(7)(a) of Regulation (EU) No 241/2014?
ANSWER: The answer explains the calculation when no formal decision on dividends has been made, and it provides guidance on how to calculate the average dividend pay-out ratio for inclusion of interim profits. The calculation involves a simple average over the three years preceding the year under consideration, taking into account actual dividends without a cap unless exceptional dividends are permitted to be excluded by the competent authority.