19.As per Article 3.1 of the Capital Adequacy Regulation, CET1 capital consists of the sum of the following elements:

1. i.Common shares issued by a bank which are eligible for inclusion in CET1 (or the equivalent for non-joint stock companies);
2. ii.Share premium resulting from the issue of instruments included in CET1;
3. iii.Retained earnings;
4. iv.Legal reserves;
5. v.Statutory reserves;
6. vi.Accumulated other comprehensive income and other disclosed reserves;
7. vii.Common shares issued by consolidated subsidiaries of a bank and held by third parties, also referred to as minority interest, which are eligible for inclusion in CET1;
8. viii.Regulatory adjustments applied in the calculation of CET1.

20.Retained earnings and other comprehensive income include audited/reviewed interim profit or loss. Expected dividend payments are excluded from CET1.

Common shares issued by the bank

21.For an instrument to be included in CET1 capital, it must meet all of the following criteria stated below. In cases where banks issue non-voting common shares, they must be identical to voting common shares of the issuing bank in all respects except the absence of voting rights for inclusion in CET1.

1. i.Represents the most subordinated claim in liquidation of the bank.
2. ii.The investor is entitled to a claim on the residual assets that is proportional to its share of issued capital, after all senior claims have been paid in liquidation (i.e. has an unlimited and variable claim, not a fixed or capped claim).
3. iii.The principal is perpetual and never repaid outside of liquidation (setting aside discretionary repurchases or other means of effectively reducing capital in a discretionary manner that is allowable under relevant law and subject to the prior approval of the Central Bank).
4. iv.The bank does nothing to create an expectation at issuance that the instrument will be bought back, redeemed or cancelled, nor do the statutory or contractual terms provide any feature that might give rise to such an expectation.
5. v.Distributions are paid out of distributable items, including retained earnings. The level of distributions is not in any way tied or linked to the amount paid in at issuance and is not subject to a contractual cap (except to the extent that a bank is unable to pay distributions that exceed the level of distributable items).
6. vi.There are no circumstances under which the distributions are obligatory. Non-payment is, therefore, not an event of default.
7. vii.Distributions are paid only after all legal and contractual obligations have been met and payments on more senior capital instruments have been made. This means that there are no preferential distributions, including in respect of other elements classified as the highest quality issued capital.
8. viii.The issued capital takes the first and proportionately greatest share of any losses as they occur. Within the highest quality capital, each instrument absorbs losses on a going concern basis proportionately and pari passu with all the others.
9. ix.The paid-in amount is recognized as equity capital (i.e. not recognized as a liability) for determining balance sheet insolvency.
10. x.The paid-in amount is classified as equity under the relevant accounting standards.
11. xi.It is directly issued and paid-in and the bank cannot directly or indirectly have funded the purchase of the instrument.
12. xii.The paid-in amount is neither secured nor covered by a guarantee of the issuer or related entity or subject to any other arrangement that legally or economically enhances the seniority of the claim.
13. xiii.It is either only issued with the approval of the owners of the issuing bank, given directly by the owners or, if permitted by applicable law, given by the Board of Directors or by other persons duly authorized by the owners.
14. xiv.It is clearly and separately disclosed on the bank’s balance sheet.