---
kind: "section"
citation: "12 C.F.R. § 1240.51"
title: "12"
number: "1240.51"
heading: "Introduction and exposure measurement."
url: "https://uscodex.org/cfr/12/1240.51"
---

# §1240.51. Introduction and exposure measurement.

- (a) **General.**
  - (1) To calculate its risk-weighted asset amounts for equity exposures, an Enterprise must use the Simple Risk-Weight Approach (SRWA) provided in [§ 1240.52](/cfr/12/1240.52.md).
  - (2) An Enterprise must treat an investment in a separate account (as defined in [§ 1240.2](/cfr/12/1240.2.md)) as if it were an equity exposure to an investment fund.
- (b) **Adjusted carrying value.** For purposes of §§ 1240.51 and [1240.52](/cfr/12/1240.52.md), the adjusted carrying value of an equity exposure is:
  - (1) For the on-balance sheet component of an equity exposure, the Enterprise's carrying value of the exposure;
  - (2) [Reserved]
  - (3) 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)](#b-1) of this section; and
  - (4) 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):
    - (i) Conditional equity commitments with an original maturity of one year or less receive a CF of 20 percent.
    - (ii) **Conditional equity commitments with an original maturity of over one year receive a CF of 50 percent.**
    - (iii) **Unconditional equity commitments receive a CF of 100 percent.**

## 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.