UBI Banca Group

Section 2 – Capital and banking supervisory ratios
2.1 Scope of application of the regulations
Supervisory capital and the relative ratios are calculated on the basis of Circular No. 263/06 (New
regulations for the prudent supervision of banks) and Circular No. 155/91 (Instructions for
compiling supervisory capital reports and capital ratios), both issued by the Bank of Italy, as
amended by the 11 th update of 31 st January 2012 and by the 14 th update of 21 st December 2011
respectively.
More specifically, Circular No. 263 sets out prudent principles of a general nature for the
calculation of supervisory capital and the absorption of capital.
In the case of the UBI Group, the adoption of the new regulations took the form of the
standardised approach.
The consolidation scope used for supervisory capital and capital ratio (the “Banking Group”)
purposes differs from the accounting scope of consolidation used to prepare the financial reports
in accordance with IFRS. More specifically the consolidation scope for accounting purposes
includes non-banking, non-financial and service companies which are excluded from the banking
supervisory consolidation scope. Furthermore, the latter employs proportionate consolidation of
banking, financial and operating companies which are jointly controlled, while these are
consolidated using the equity method in the financial statements.
There are no hindrances within the Group, either legal or substantial, which might prevent the
rapid transfer of capital resources or funds.
2.2 Banking supervisory capital
A. Qualitative information
Supervisory capital is determined on the basis of the figures for capital and profit and loss
resulting from the application of IFRS and it is calculated as the algebraic sum of a series of
positive and negative items, which are considered eligible for inclusion – with or without
limitations - in relation to the ‘quality’ of the capital. The amount of those items is considered net
of any tax expenses. Positive components of the capital must be fully available to the Bank, so
that they can be used without restrictions to cover risks to which the intermediary is exposed.
Supervisory capital is composed of tier one capital and the supplementary capital (tier two), net of
“prudential filters” 2 and some deductions.
1. Tier one capital
Tier one capital includes paid up share capital, share premiums, reserves (considered prime
quality items), non innovative instruments (not present in the UBI Group) and innovative capital
instruments, profit for the period, net of the part available for distribution as dividends and other
forms of distribution and positive prudent filters of tier one capital and instruments subject to
transition provisions (grandfathering). Treasury shares held in portfolio, goodwill, other intangible
2 Prudent filters are corrections made to equity items in the balance sheet made to safeguard the quality of the supervisory
capital and to reduce potential volatility induced by the application of IFRS.
With regard to those prudent filters that are most important to the UBI Group, the regulations state that unrealised gains
and losses on available-for-sale financial assets are divided between equity instruments (inclusive of collective investment
instruments) and debt instruments. For each of these aggregates, if the reserve in question is negative it reduces the tier
one capital and if it is positive the tier two capital is increased by 50% of the reserve.
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