Under Article 159 of Regulation (EU) No 575/2013 (CRR), “institutions shall subtract the expected loss amounts calculated in accordance with Article 158(5), (6) and (10) from the general and specific credit risk adjustments in accordance with Article 110 and additional value adjustments in accordance with Articles 34 and 105 110 and other own funds reductions related to these exposures except for the deductions made in accordance with point (m) Article 36(1)”.

Hence, the Additional Value Adjustments (AVAs) to be included in the offset against expected losses (EL) are only those deducted from the own funds according to Article 34 CRR under the prudent valuation requirements of Article 105 CRR (Q&A 933), and referring to the credit risk exposures for which EL are calculated in accordance with Article 158(5), (6) and (10) CRR (Q&A 950). In other words, only AVAs associated to credit risk exposures due to counterparty default should be included within the offset in Article 159 CRR, as the offset under that Article is performed against expected loss amounts for credit risk.

Consequently, the AVAs to be included are limited to unearned credit spreads AVAs (Q&A 1835) and AVAs associated to credit risk exposures that are an element of unearned credit spreads in the sense of Article 12(2) of 2016/101. In particular, AVAs computed under Article 9 of Regulation (EU) No 2016/101, linked to market price uncertainty, are not in the scope of Article 159 CRR.