--- kind: "section" citation: "12 C.F.R. § 324.204" title: "12" number: "324.204" heading: "Measure for market risk." url: "https://uscodex.org/cfr/12/324.204" --- # §324.204. Measure for market risk. - (a) **General requirement.** - (1) An FDIC-supervised institution must calculate its standardized measure for market risk by following the steps described in [paragraph (a)(2)](#a-2) of this section. An advanced approaches FDIC-supervised institution also must calculate an advanced measure for market risk by following the steps in [paragraph (a)(2)](#a-2) of this section. - (2) **Measure for market risk.** An FDIC-supervised institution must calculate the standardized measure for market risk, which equals the sum of the VaR-based capital requirement, stressed VaR-based capital requirement, specific risk add-ons, incremental risk capital requirement, comprehensive risk capital requirement, and capital requirement for de minimis exposures all as defined under this [paragraph (a)(2)](#a-2), (except, that the FDIC-supervised institution may not use the SFA in [§ 324.210(b)(2)(vii)(B)](/cfr/12/324.210.md?p=b-2-vii-B) for purposes of this calculation), plus any additional capital requirement established by the FDIC. An advanced approaches FDIC-supervised institution that has completed the parallel run process and that has received notifications from the FDIC pursuant to [§ 324.121(d)](/cfr/12/324.121.md?p=d) also must calculate the advanced measure for market risk, which equals the sum of the VaR-based capital requirement, stressed VaR-based capital requirement, specific risk add-ons, incremental risk capital requirement, comprehensive risk capital requirement, and capital requirement for de minimis exposures as defined under this [paragraph (a)(2)](#a-2), plus any additional capital requirement established by the FDIC. - (i) **VaR-based capital requirement.** An FDIC-supervised institution's VaR-based capital requirement equals the greater of: - (A) The previous day's VaR-based measure as calculated under [§ 324.205](/cfr/12/324.205.md); or - (B) The average of the daily VaR-based measures as calculated under [§ 324.205](/cfr/12/324.205.md) for each of the preceding 60 business days multiplied by three, except as provided in [paragraph (b)](#b) of this section. - (ii) **Stressed VaR-based capital requirement.** An FDIC-supervised institution's stressed VaR-based capital requirement equals the greater of: - (A) The most recent stressed VaR-based measure as calculated under [§ 324.206](/cfr/12/324.206.md); or - (B) The average of the stressed VaR-based measures as calculated under [§ 324.206](/cfr/12/324.206.md) for each of the preceding 12 weeks multiplied by three, except as provided in [paragraph (b)](#b) of this section. - (iii) **Specific risk add-ons.** An FDIC-supervised institution's specific risk add-ons equal any specific risk add-ons that are required under [§ 324.207](/cfr/12/324.207.md) and are calculated in accordance with [§ 324.210](/cfr/12/324.210.md). - (iv) **Incremental risk capital requirement.** An FDIC-supervised institution's incremental risk capital requirement equals any incremental risk capital requirement as calculated under [§ 324.208](/cfr/12/324.208.md). - (v) **Comprehensive risk capital requirement.** An FDIC-supervised institution's comprehensive risk capital requirement equals any comprehensive risk capital requirement as calculated under [§ 324.209](/cfr/12/324.209.md). - (vi) **Capital requirement for de minimis exposures.** An FDIC-supervised institution's capital requirement for de minimis exposures equals: - (A) The absolute value of the fair value of those de minimis exposures that are not captured in the FDIC-supervised institution's VaR-based measure or under [paragraph (a)(2)(vi)(B)](#a-2-vi-B) of this section; and - (B) With the prior written approval of the FDIC, the capital requirement for any de minimis exposures using alternative techniques that appropriately measure the market risk associated with those exposures. - (b) **Backtesting.** An FDIC-supervised institution must compare each of its most recent 250 business days' trading losses (excluding fees, commissions, reserves, net interest income, and intraday trading) with the corresponding daily VaR-based measures calibrated to a one-day holding period and at a one-tail, 99.0 percent confidence level. An FDIC-supervised institution must begin backtesting as required by this [paragraph (b)](#b) no later than one year after the later of January 1, 2014, and the date on which the FDIC-supervised institution becomes subject to this subpart. In the interim, consistent with safety and soundness principles, an FDIC-supervised institution subject to this subpart as of January 1, 2014 should continue to follow backtesting procedures in accordance with the FDIC's supervisory expectations. - (1) Once each quarter, the FDIC-supervised institution must identify the number of exceptions (that is, the number of business days for which the actual daily net trading loss, if any, exceeds the corresponding daily VaR-based measure) that have occurred over the preceding 250 business days. - (2) An FDIC-supervised institution must use the multiplication factor in Table 1 to § 324.204 that corresponds to the number of exceptions identified in [paragraph (b)(1)](#b-1) of this section to determine its VaR-based capital requirement for market risk under [paragraph (a)(2)(i)](#a-2-i) of this section and to determine its stressed VaR-based capital requirement for market risk under [paragraph (a)(2)(ii)](#a-2-ii) of this section until it obtains the next quarter's backtesting results, unless the FDIC notifies the FDIC-supervised institution in writing that a different adjustment or other action is appropriate. ## 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.