Extract
[...] These requirements, set by article 92 of the CRR, have been set for to ensure that in the event of an economic shock, of financial crisis or of significant depreciation of assets (as illustrated by the case of SV Bank, the institution may be able to absorb the losses without risking a resolution. Although the responsethe example of these ratios does not constitute an absolute guarantee, the historical data in Europe show that these thresholds reduce better than other devices the risk of bankruptcy or of financial difficulties for institutions. However, it is not about not a 100% full coverage. III. The composition of the numerator The numerator includes the own funds category 1 and the own funds category 2. [...]
[...] The shareholders can then, if they wish, feed the free reserve to support self-investment, in order to avoid excessive dependence on bank financing, to protect against conjunctural or structural risks, or to avoid diluting existing shareholders too much by frequently resorting to capital increases. Own funds also include the profit of the exercise. If shareholders do not wish to distribute the entire profit, they may either to top up the free reserve account, either place the profit in report again. [...]
[...] The creditors of the company are repaid in priority, shareholders recovering their contributions only after the satisfaction of other creditors. The social capital therefore constitutes a permanent resource of the company, in contrast to current liabilities, such as loans, which are not. In corporate law, one includes in the social capital the initial emission, contribution or merger. These premiums correspond to amounts paid to the company during capital operations, destined to to cover the operating costs and to to balance the rights of shareholders on reserves. [...]
[...] Thus, the capital requirements are broken down on the one hand through governance and prudential ratios, and on the other hand in the form of cushions, aiming to further strengthen the resilience of institutions. II. Capital Requirements The solvency ratio formula is composed as follows : At numerator, on retrouve les total own funds, which includes several categories of funds classified by order of robustness. These funds are subdivided into : - Category 1 own funds ; - Category 2 own funds. [...]
[...] In French law, the distribution of dividends is complex. In general, it is preferable to report again a part of the distributable profit if its allocation has not yet been decided, because French company law requires that distribute the profits of the exercise first and, from in a subsidiary manner, the reserves. In reporting profit again not affected, the the company can consider it as distributable profit for the next financial years, this allows to bypass this priority order. Thus, many companies choose to place their unaffected profit either in reserve or to report it again. [...]
