In Regulation (EU) No 2021/451 - ITS on supervisory reporting of institutions, validation rule v4811_m compares the expected loss amount (EL) reported in CA1 (including expected loss for equities) with the expected loss amount for non-defaulted and defaulted exposures in CA4. However, since the expected loss for equity investments is not reported in CA4, the rule may not be met in certain cases.

With reference to Articles 36(1)(d), 159 and 158(5), (6) and (10) of Regulation (EU) No 575/2013 (CRR), it could be deduced that expected loss amounts for equity exposures are not to be included in the expected loss amount comparison. This is also in line with the modelling on the validation rules v4811_m and v0225_m. Thus, the EL from equity exposures is not to be deducted in line 380 of CA1, otherwise there cannot be a match with lines 100 and 145 in CA4. As a consequence, the validation rule v4811_m was breached.

In an older version of Regulation (EU) No 575/2013 , there was still a provision (in Articles 154 and 155 CRR) which required that the loss amounts for equity exposures are to be taken into account in the expected loss comparison according to the simple risk weight approach.

It could be confirmed that the expected loss amount for equity exposures calculated in accordance with Article 158(7), (8) or (9) CRR is not included in the impairment comparison according to Article 159 CRR. However, this expected loss amount for equity exposures is to be deducted directly from Common Equity Tier 1 capital in accordance with Article 36(1)(d) CRR. Therefore, in addition to any shortfall in value adjustments according to Article 159 CRR, the expected loss amount for equity exposures had to be reported in line 380 of the reporting form C01.00 of Annex I of Regulation (EU) No. 2021/451 (ITS on Reporting) and the validation rule fails.