§1240.51. Introduction and exposure measurement.
12 C.F.R. § 1240.51
General.
To calculate its risk-weighted asset amounts for equity exposures, an Enterprise must use the Simple Risk-Weight Approach (SRWA) provided in § 1240.52.
An Enterprise must treat an investment in a separate account (as defined in § 1240.2) as if it were an equity exposure to an investment fund.
Adjusted carrying value. For purposes of §§ 1240.51 and 1240.52, the adjusted carrying value of an equity exposure is:
For the on-balance sheet component of an equity exposure, the Enterprise's carrying value of the exposure;
[Reserved]
For the off-balance sheet component of an equity exposure that is not an equity commitment, the effective notional principal amount of the exposure, the size of which is equivalent to a hypothetical on-balance sheet position in the underlying equity instrument that would evidence the same change in fair value (measured in dollars) given a small change in the price of the underlying equity instrument, minus the adjusted carrying value of the on-balance sheet component of the exposure as calculated in paragraph (b)(1) of this section; and
For a commitment to acquire an equity exposure (an equity commitment), the effective notional principal amount of the exposure is multiplied by the following conversion factors (CFs):
Conditional equity commitments with an original maturity of one year or less receive a CF of 20 percent.
Conditional equity commitments with an original maturity of over one year receive a CF of 50 percent.
Unconditional equity commitments receive a CF of 100 percent.
Notes, amendments, and revision history
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.