CRR article 3 allows institutions to voluntarily apply stricter requirements than prescribed by the the CRR. The articles 47c, 111 and 159 allow to take into account 'other own funds reductions'. In case of art 47c (NPE) as part of NPE coverage, art 111 (SA) to reduce the exposure value and art 159 (IRB) in the calculation of expected loss shortfall to offset against the ELA. Inclusion of reductions per CRR 3 could result in a situation where the calculation per CRR 159 results in lower CET1 capital deduction required as per article 36.1(d) or even in a positive amount which can be included in the Tier 2 capital up to 0.6% RWA calculated using IRB (CRR 62(d)). Illustrative example for a defaulted exposure (IRB): ELA 20 SCRA 20 CRR3 5 Required level of coverage (47c.1.a) 40 Option 1: The reduction per CRR article 3 can be included, the calculation per CRR 159 results in excess amount (ELbe 20, SCRA+CRR3=25) The own funds impact (excess included in T2): CET1 = -20 - 5 -15 = -40 T2: = +5 Option 2: The reduction per CRR article 3 cannot be included, the calculation per CRR 159 results in zero amount (ELbe 20, SCRA 20) The own funds impact (no excess): CET1 = -20 - 5- 15 = -40 T2: = 0 If voluntary CET1 reductions per article 3 qualify as 'other own funds reductions' it is more beneficial for institutions to apply voluntary capital reductions per article 3 (due to possible inclusion of T2 capital) in order to avoid the application of article 36.1(m).