Validation rule v6405_m does not calculate right when the credit institution has only T1 capital and no T2 capital. Report is COREP own funds.

Financial Supervisory Authority in Finland has this opinion.

According to Art. 4 (1) No. 71 lit. b) of Regulation (EU) No. 575/2013 (CRR) eligible capital for the purposes of Part Four of the CRR is defined as the sum of Tier 1 capital according to Art. 25 of the CRR and Tier 2 capital as referred to in Art. 71 of the CRR that is equal to or less than one third of Tier 1 capital as calculated above. Consequently, an institution’s eligible capital for the purposes of Part Four of the CRR cannot exceed 4/3 of its Tier 1 capital.
Validation rule v6405_m states that an institution’s eligible capital for the purposes of large exposures which is reported in {C04.00; r226; c010} shall be equal to the minimum of 4/3 of an institution’s Tier 1 capital which is reported in {C01.00; r015; c010} or its total own funds reported in {C01.00; r010; c010}. If an institution does not have any Tier 2 capital, its total own funds equal the institution’s Tier 1 capital. Validation rule v6405_m states that in this case the eligible capital for the purposes of large exposures equals the total own funds rather than 4/3 of its Tier 1 capital because there is no Tier 2 capital which can be used to fulfill the capital requirements of Part Four of the CRR. In case an institution has some Tier 2 capital but less than 1/3 of its Tier 1 capital, validation rule v6405_m again states that the eligible capital for the purposes of large exposures equals the total own funds of the institution. Only in case an institution’s Tier 2 capital exceeds 1/3 of its Tier 1 capital the validation rule requires an institution to report only 4/3 of its Tier 1 capital as eligible for the purposes of large exposures. This is in line with the requirements as laid out in Art. 4 (1) No. 71 lit. b) of the CRR. Thus, the validation rule v6405_m is correct.