Annex 4 Capital and Reserves Overview of the national rules Country Capital Reserves Austria Paid­up capital for institutions registered as: Disclosed reserves including the liability reserve 1. partnerships of commercial law, such capital as has been dedicated Credit institutions shall form a liability reserve which amounts to to the company plus claims of the personally liable partners arising 1% of the assessment basis for the calculation of own funds; a from the business activities of the enterprise minus the losses, release of the liability reserve is allowed only to such extent as is withdrawals and liabilities of the personally liable partners to the necessary to fulfil obligations pursuant to deposit guarantee and company; investor compensation or to cover losses otherwise to be shown in 2. stock corporations and limited liability companies, the paid­up share the annual financial statement; the liability reserve shall be capital; replenished to the extent of the released amount no later than 3. cooperatives, the money contributions paid in on the shares; within the following five fiscal years; the allocation to and release 4. savings banks, the paid­up capital on formation; of the liability reserve shall be shown separately in the profit and 5. State mortgage banks and the Mortgage Bond Division of the loss account. Austrian State Mortgage Banks, the paid­up capital; 6. branch offices of foreign credit institutions, the endowment capital put at their disposal in freely convertible currency; and 8. credit institutions, the participation capital (paras 4 and 5) without obligation of subsequent payment of dividends. Belgium Paid­up capital and share premium (excluding preferential shares) as Reserves and profit and losses brought forward (after tax and defined by company law. (Non­cumulative undated preferential shares interim dividends). may be included but this is not relevant for BE) Adjustment to the reserve are made in order to take into account the IFRS prudential filters, namely: ­ revaluation reserves relating to AFS debt securities, loans and receivables, and cash flow hedge reserves are excluded; positive revaluation reserves relating to AFS equities and tangible assets are included in tier II. Cyprus Issued and wholly paid­up share capital, non­cumulative and non­ Reserves excluding revaluation reserves, previous years' retained redeemable preference shares, share premium accounts. earnings, interim profits Czech 1. Paid­up capital stock entered in the Companies Register, 1. statutory reserve funds other reserve funds created from after­ Republic 2. paid­up share premium (cumulative preferential shares are not tax profit except for specific reserve funds, relevant for CZ) 2. undistributed after­tax profit of previous years, provided that the relevant year’s profit has been confirmed by external auditors in their audit of the financial statements and the partners or general meeting have approved the financial statements and have determined the amount of undistributed profit, 3. net income in the approval process, provided that such income approved by the external auditor represents profit reflecting 1 estimated dividends and other payments out of the estimated distribution of profit, 4. minus accumulated loss of previous years, 5. minus loss in the approval process Denmark Capital: Paid­up share capital, guarantee capital, or cooperative Disclosed Reserves, excluding revaluation reserves and disclosed capital, and additional paid­in capital. Excluding preferential shares. retained earnings or losses. Guarantee capital of savings banks is recognised as paid­up capital. Depositors and guarantors of the savings bank are entitled to vote when electing shareholder committee members. Each depositor has 1 vote, and each guarantor has between 1 and 20 votes depending of his share of paid­up guarantee capital. Savings banks can under certain conditions be dissolved without liquidation and the total assets and debt can be transferred to a limited company with a bank license Estonia Paid­in share capital and share premium except for amounts paid for Reserves formed on the basis of law and audited profits and losses preferred shares from previous years Finland Capital in limited liability companies: Share capital, funds in share Reserve fund (vararahasto). Non­restricted equity capital (vapaa issue accounts and premium fund. According to new bill on company oma pääoma, uudempi vapaat rahastot). 'Restricted reserves' law for new companies in form of joint stock company there will not be include 'Profit or loss brought forward' and 'Profit or loss for the premium funds anymore. The bill is planned to come into force in financial year' (i.e. retained earnings). Voluntary provisions September 2006. (vapaaehtoiset varaukset) net of any foreseeable tax charges. The Capital in cooperatives: cooperative capital, additional cooperative amalgamation of cooperative banks is allowed to calculate in the capital (lisäosuuspääoma) and investment share capital non­restricted equity capital technical reserves of their internal (sijoitusosuuspääoma). insurance company (OVY:n vakuutustekniset varaukset mm. Capital in savings banks: basic capital (peruspääoma) ja original fund tasoitusmäärä, varaus tuntemattomiin vahinkoihin). (kantarahasto). The Credit Institution Act includes also capital loans as part of original own funds without a limit stated in the Act. The supervisory authority is allowed to guide the institutions to follow international recommenedations. France Share capital, in addition to the capital of those institutions subject to Reserves, including revaluation reserves; the present Regulation which are constituted in the form of ­ share premiums; commercial companies, shall be deemed to include the sums which ­ retained earnings; take the place thereof or which are equivalent thereto, under the ­ the profit for the last financial year, pending its allocation, less legislation in force, in the accounts of institutions governed by special the dividend distribution to be provided for Articles of association, in particular permanent endowments of funds or fixed or variable capital represented by actually paid­up "parts sociales" or by "certificats coopératifs d'investissement" Germany According to German Banking Act the following instruments are Depending on the legal form and according to section 10 para. 2a differentiated depending on the legal form of the institution. sentence 1 No. 1 to 6 and No. 9 KWG “reserves” in the meaning of Instruments eligible to original own funds, according to section 10 Article 23 of Directive 86/635/EEC are explicitly referred to as para. 2a German Banking Act (KWG), are: being original own funds. 2 ·Paid­up ordinary share capital (“Grundkapital”) for joint stock corporations (“Aktiengesellschaften” – AG) Reserves comprise the amounts designated as such in the balance ·Paid­up ordinary share capital (“Grundkapital”) by shareholders sheet in the last approved annual accounts for the end of a (“Kommanditaktionäre”) and paid­up business capital financial year. Reserves which are formed as a result of premium (“Geschäftskapital”) of general partners (“Komplementäre”) for income obtained through a share issue or through some other partnerships limited by shares (“Kommanditgesellschaften auf Aktien” inflow of external funds may be included from the time of their – KGaA) inflow. ·Paid­up capital (“Stammkapital”) for limited liability companies (“Gesellschaften mit beschränkter Haftung” – GmbH) Examples: reserves, share premiums and retained earnings. ·Endowment capital (“Dotationskapital”), for public banks (“öffentlich­ No revaluation reserves. rechtliche Kreditinstitute”) ·Paid­up capital (“Geschäftsguthaben”) for co­operative banking From January 2007 valuation adjustments according to IFRS societies (“Volksbanken” and “Raiffeisenbanken”) subject to Basel/CEBS prudential filters: unrealised gains on ·Paid­up business capital (“Geschäftskapital”) for general commercial investment property (IAS 40); revaluation reserves relating to partnerships (“Offene Handelsgesellschaften” – OHG) own use property; revaluation reserves relating to AFS equities, ·Paid­up business capital (“Geschäftskapital”) of general partners AFS debt securities and AFS loans and receivables; cash flow (“Komplementäre”) and, in the amount paid up and registered in the hedge revaluation reserve. Commercial Register at the court of registration, capital contributions (“Kapitaleinlagen”) by limited partners (“Kommanditisten”) for limited Less net gains from securitisation. commercial partnerships (“Kommanditgesellschaften” ­ KG) Main features Main features: 1. available to absorb losses on a going­concern basis 1. issued 2. perpetual: they are infinitely available for loss participation and 2. fully paid­in there are no covenants under law or contract (maturities or call 3. available to absorb losses on a going­concern basis options, be they qualified or not, be they explicit or implied) 4. perpetual: they are infinitely available for loss participation and 3. the bank has the full discretion as to the amount and timing of there are no covenants under law or contract (maturities or call distributions options, be they qualified or not, be they explicit or implied) 5. the instruments provide the bank with the full discretion as to the No different treatment for reasons of consolidation. amount and timing of distributions 6. the holders of the instrument have direct (pro rata) ownership in the bank under law. Equivalent item: ­ Perpetual