§ 1253.2. Definitions.
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/us/cfr/t12/s§ 1253.2·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
For purposes of this part: Activity means a business line, business practice, offering, or service, including a guarantee, a financial instrument, consulting or marketing, that the Enterprise provides to the market either on a standalone basis or as part of a business line, business practice, offering, or service. Authorizing statute means the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act, as applicable. Credit risk is the potential that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms.
Credit risk includes the decline in measured quality of a credit exposure that might result in increased capital costs, provisioning expenses, or a reduction in economic return. Days means calendar days. Market risk means the risk that the market value, or estimated fair value if the market value is not available, of an Enterprise's portfolio will decline as a result of changes in interest rates, foreign exchange rates, or equity or commodity prices. New activity has the meaning provided in § 1253.3.
New product has the meaning provided in § 1253.4. Operational risk means the risk of loss resulting from inadequate or failed internal processes, people, or systems, or from external events, including all direct and indirect economic losses related to legal liability. Operational risk includes reputational risk, which is the potential for substantial negative publicity regarding an Enterprise's business practices. Pilot means an activity that has a limited term and scope for purposes of evaluating the viability of the activity.
A pilot may also be referred to as a testing initiative, test and learn, temporary authorization, or by other names.