This provision presents an alternative approach for financial institutions regarding capital adequacy calculations associated with excess amounts. Instead of applying the stringent 1,250% risk weight to amounts that exceed the specified limits under Article 89(1) and (2), institutions have the option to deduct these excess amounts from their Common Equity Tier 1 (CET1) capital. This method, outlined in point (k) of Article 36(1), allows for potentially more favourable capital treatment.

By leveraging this deduction strategy, institutions can enhance their regulatory capital position while remaining compliant with regulatory frameworks. It is vital for compliance professionals to evaluate the implications of this provision and ensure appropriate governance mechanisms are in place to manage capital calculations accurately.