§ 1240.100. Purpose, applicability, and principle of conservatism.
193 words·~1 min read·
/us/cfr/t12/s§ 1240.100·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(a)Purpose. This subpart establishes:
(1)Minimum requirements for using Enterprise-specific internal risk measurement and management processes for calculating risk-based capital requirements; and
(2)Methodologies for the Enterprises to calculate their advanced approaches total risk-weighted assets.
(b)Applicability.
(1)This subpart applies to each Enterprise.
(2)An Enterprise must also include in its calculation of advanced credit risk-weighted assets under this subpart all covered positions, as defined in subpart F of this part.
(c)Principle of conservatism. Notwithstanding the requirements of this subpart, an Enterprise may choose not to apply a provision of this subpart to one or more exposures provided that:
(1)The Enterprise can demonstrate on an ongoing basis to the satisfaction of FHFA that not applying the provision would, in all circumstances, unambiguously generate a risk-based capital requirement for each such exposure greater than that which would otherwise be required under this subpart;
(2)The Enterprise appropriately manages the risk of each such exposure;
(3)The Enterprise notifies FHFA in writing prior to applying this principle to each such exposure; and
(4)The exposures to which the Enterprise applies this principle are not, in the aggregate, material to the Enterprise.