---
kind: "section"
citation: "12 C.F.R. § 324.153"
title: "12"
number: "324.153"
heading: "Internal models approach (IMA)."
url: "https://uscodex.org/cfr/12/324.153"
---

# §324.153. Internal models approach (IMA).

- (a) **General.** An FDIC-supervised institution may calculate its risk-weighted asset amount for equity exposures using the IMA by modeling publicly traded and non-publicly traded equity exposures (in accordance with [paragraph (c)](#c) of this section) or by modeling only publicly traded equity exposures (in accordance with paragraphs [(c)](#c) and (d) of this section).
- (b) **Qualifying criteria.** To qualify to use the IMA to calculate risk-weighted assets for equity exposures, an FDIC-supervised institution must receive prior written approval from the FDIC. To receive such approval, the FDIC-supervised institution must demonstrate to the FDIC's satisfaction that the FDIC-supervised institution meets the following criteria:
  - (1) The FDIC-supervised institution must have one or more models that:
    - (i) Assess the potential decline in value of its modeled equity exposures;
    - (ii) Are commensurate with the size, complexity, and composition of the FDIC-supervised institution's modeled equity exposures; and
    - (iii) **Adequately capture both general market risk and idiosyncratic risk.**
  - (2) The FDIC-supervised institution's model must produce an estimate of potential losses for its modeled equity exposures that is no less than the estimate of potential losses produced by a VaR methodology employing a 99th percentile one-tailed confidence interval of the distribution of quarterly returns for a benchmark portfolio of equity exposures comparable to the FDIC-supervised institution's modeled equity exposures using a long-term sample period.
  - (3) The number of risk factors and exposures in the sample and the data period used for quantification in the FDIC-supervised institution's model and benchmarking exercise must be sufficient to provide confidence in the accuracy and robustness of the FDIC-supervised institution's estimates.
  - (4) The FDIC-supervised institution's model and benchmarking process must incorporate data that are relevant in representing the risk profile of the FDIC-supervised institution's modeled equity exposures, and must include data from at least one equity market cycle containing adverse market movements relevant to the risk profile of the FDIC-supervised institution's modeled equity exposures. In addition, the FDIC-supervised institution's benchmarking exercise must be based on daily market prices for the benchmark portfolio. If the FDIC-supervised institution's model uses a scenario methodology, the FDIC-supervised institution must demonstrate that the model produces a conservative estimate of potential losses on the FDIC-supervised institution's modeled equity exposures over a relevant long-term market cycle. If the FDIC-supervised institution employs risk factor models, the FDIC-supervised institution must demonstrate through empirical analysis the appropriateness of the risk factors used.
  - (5) The FDIC-supervised institution must be able to demonstrate, using theoretical arguments and empirical evidence, that any proxies used in the modeling process are comparable to the FDIC-supervised institution's modeled equity exposures and that the FDIC-supervised institution has made appropriate adjustments for differences. The FDIC-supervised institution must derive any proxies for its modeled equity exposures and benchmark portfolio using historical market data that are relevant to the FDIC-supervised institution's modeled equity exposures and benchmark portfolio (or, where not, must use appropriately adjusted data), and such proxies must be robust estimates of the risk of the FDIC-supervised institution's modeled equity exposures.
- (c) **Risk-weighted assets calculation for an FDIC-supervised institution using the IMA for publicly traded and non-publicly traded equity exposures.** If an FDIC-supervised institution models publicly traded and non-publicly traded equity exposures, the FDIC-supervised institution's aggregate risk-weighted asset amount for its equity exposures is equal to the sum of:
  - (1) The risk-weighted asset amount of each equity exposure that qualifies for a 0 percent, 20 percent, or 100 percent risk weight under [§ 324.152(b)(1) through (b)(3)(i)](/cfr/12/324.152.md?p=b-1..b-3-i) (as determined under [§ 324.152](/cfr/12/324.152.md)) and each equity exposure to an investment fund (as determined under [§ 324.154](/cfr/12/324.154.md)); and
  - (2) **The greater of—**
    - (i) The estimate of potential losses on the FDIC-supervised institution's equity exposures (other than equity exposures referenced in [paragraph (c)(1)](#c-1) of this section) generated by the FDIC-supervised institution's internal equity exposure model multiplied by 12.5; or
    - (ii) **The sum of—**
      - (A) 200 percent multiplied by the aggregate adjusted carrying value of the FDIC-supervised institution's publicly traded equity exposures that do not belong to a hedge pair, do not qualify for a 0 percent, 20 percent, or 100 percent risk weight under [§ 324.152(b)(1) through (b)(3)(i)](/cfr/12/324.152.md?p=b-1..b-3-i), and are not equity exposures to an investment fund;
      - (B) 200 percent multiplied by the aggregate ineffective portion of all hedge pairs; and
      - (C) 300 percent multiplied by the aggregate adjusted carrying value of the FDIC-supervised institution's equity exposures that are not publicly traded, do not qualify for a 0 percent, 20 percent, or 100 percent risk weight under [§ 324.152(b)(1) through (b)(3)(i)](/cfr/12/324.152.md?p=b-1..b-3-i), and are not equity exposures to an investment fund.
- (d) **Risk-weighted assets calculation for an FDIC-supervised institution using the IMA only for publicly traded equity exposures.** If an FDIC-supervised institution models only publicly traded equity exposures, the FDIC-supervised institution's aggregate risk-weighted asset amount for its equity exposures is equal to the sum of:
  - (1) The risk-weighted asset amount of each equity exposure that qualifies for a 0 percent, 20 percent, or 100 percent risk weight under [§§ 324.152(b)(1) through (b)(3)(i)](/cfr/12/324.152.md?p=b-1..b-3-i) (as determined under [§ 324.152](/cfr/12/324.152.md)), each equity exposure that qualifies for a 400 percent risk weight under [§ 324.152(b)(5)](/cfr/12/324.152.md?p=b-5) or a 600 percent risk weight under [§ 324.152(b)(6)](/cfr/12/324.152.md?p=b-6) (as determined under [§ 324.152](/cfr/12/324.152.md)), and each equity exposure to an investment fund (as determined under [§ 324.154](/cfr/12/324.154.md)); and
  - (2) **The greater of—**
    - (i) The estimate of potential losses on the FDIC-supervised institution's equity exposures (other than equity exposures referenced in [paragraph (d)(1)](#d-1) of this section) generated by the FDIC-supervised institution's internal equity exposure model multiplied by 12.5; or
    - (ii) **The sum of—**
      - (A) 200 percent multiplied by the aggregate adjusted carrying value of the FDIC-supervised institution's publicly traded equity exposures that do not belong to a hedge pair, do not qualify for a 0 percent, 20 percent, or 100 percent risk weight under [§ 324.152(b)(1) through (b)(3)(i)](/cfr/12/324.152.md?p=b-1..b-3-i), and are not equity exposures to an investment fund; and
      - (B) 200 percent multiplied by the aggregate ineffective portion of all hedge pairs.

## Notes

### Authority

Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note), Pub. L. 115-174; section 4014 § 201, Pub. L. 116-136, 134 Stat. 281 (15 U.S.C. 9052).

### Source

Source: 78 FR 55471, Sept. 10, 2013, unless otherwise noted.