1. Institutions may replace the capital requirement referred to in point (b) of Article 92(3) by a capital requirement calculated in accordance with point (a) of that paragraph in respect of their trading-book business, provided that the size of their on- and off-balance sheet trading-book business meets both the following conditions:
(a) it is normally less than 5 % of the total assets and EUR 15 million;
(b) it never exceeds 6 % of total assets and EUR 20 million.
2. In calculating the size of on- and off-balance sheet business, institutions shall apply the following:
(a) debt instruments shall be valued at their market prices or their nominal values, equities at their market prices and derivatives according to the nominal or market values of the instruments underlying them;
(b) the absolute value of long positions shall be summed with the absolute value of short positions.
3. Where an institution fails to meet the condition in point (b) of paragraph 1 it shall immediately notify the competent authority. If, following assessment by the competent authority, the competent authority determines and notifies the institution that the requirement in point (a) of paragraph 1 is not met, the institution shall cease to make use of paragraph 1 from the next reporting date.