The answer to this question is provided by the European Commission.

Pursuant to Article 169 of Commission Delegated Regulation (EU) 2015/35, the standard formula capital requirement for equity risk shall be equal to the loss in the basic own funds that would result from an instantaneous decrease equal to a certain percentage in the value of an equity investment.
For that purpose, the value of the equity investment should never be assumed to be negative, i.e. where the value is negative, the value to be used for the purpose of calculating the equity risk should be null.
Article 184 of the Delegated Regulation specifies the formula calculation of the market risk concentration sub-module. For that purpose as well, assets should never be assumed to have a negative value.

Disclaimer provided by the European Commission:
The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.