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Version date: 1 June 2011 - onwards

Annex 2 The 15% of common equity limit on specified items

1. This Annex is meant to clarify the calculation of the 15% limit on significant investments in the common shares of unconsolidated financial institutions (banks, insurance and other financial entities); mortgage servicing rights, and deferred tax assets arising from temporary differences (collectively referred to as specified items).

2. The recognition of these specified items will be limited to 15% of Common Equity Tier 1 (CET1) capital, after the application of all deductions. To determine the maximum amount of the specified items that can be recognised [The actual amount that will be recognised may be lower than this maximum, either because the sum of the three specified items are below the 15% limit set out in this annex, or due to the application of the 10% limit applied to each item.], banks and supervisors should multiply the amount of CET1 [At this point this is a "hypothetical" amount of CET1 in that it is used only for the purposes of determining the deduction of the specif

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