---
kind: "section"
citation: "12 C.F.R. § 1240.100"
title: "12"
number: "1240.100"
heading: "Purpose, applicability, and principle of conservatism."
url: "https://uscodex.org/cfr/12/1240.100"
---

# §1240.100. Purpose, applicability, and principle of conservatism.

- (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.

## Notes

### Authority

Authority: 12 U.S.C. 4511, 4513, 4513b, 4514, 4515, 4517, 4526, 4611-4612, 4631-36.

### Source

Source: 85 FR 82198, Dec. 17, 2020, unless otherwise noted.