---
kind: "section"
citation: "12 C.F.R. § 324.207"
title: "12"
number: "324.207"
heading: "Specific risk."
url: "https://uscodex.org/cfr/12/324.207"
---

# §324.207. Specific risk.

- (a) **General requirement.** An FDIC-supervised institution must use one of the methods in this section to measure the specific risk for each of its debt, equity, and securitization positions with specific risk.
- (b) **Modeled specific risk.** An FDIC-supervised institution may use models to measure the specific risk of covered positions as provided in [§ 324.205(a)](/cfr/12/324.205.md?p=a) (therefore, excluding securitization positions that are not modeled under [§ 324.209](/cfr/12/324.209.md)). An FDIC-supervised institution must use models to measure the specific risk of correlation trading positions that are modeled under [§ 324.209](/cfr/12/324.209.md).
  - (1) **Requirements for specific risk modeling.**
    - (i) If an FDIC-supervised institution uses internal models to measure the specific risk of a portfolio, the internal models must:
      - (A) Explain the historical price variation in the portfolio;
      - (B) Be responsive to changes in market conditions;
      - (C) Be robust to an adverse environment, including signaling rising risk in an adverse environment; and
      - (D) **Capture all material components of specific risk for the debt and equity positions in the portfolio.** Specifically, the internal models must:

        (1) Capture event risk and idiosyncratic risk; and

        (2) Capture and demonstrate sensitivity to material differences between positions that are similar but not identical and to changes in portfolio composition and concentrations.

    - (ii) If an FDIC-supervised institution calculates an incremental risk measure for a portfolio of debt or equity positions under [§ 324.208](/cfr/12/324.208.md), the FDIC-supervised institution is not required to capture default and credit migration risks in its internal models used to measure the specific risk of those portfolios.
  - (2) **Specific risk fully modeled for one or more portfolios.** If the FDIC-supervised institution's VaR-based measure captures all material aspects of specific risk for one or more of its portfolios of debt, equity, or correlation trading positions, the FDIC-supervised institution has no specific risk add-on for those portfolios for purposes of [§ 324.204(a)(2)(iii)](/cfr/12/324.204.md?p=a-2-iii).
- (c) **Specific risk not modeled.**
  - (1) If the FDIC-supervised institution's VaR-based measure does not capture all material aspects of specific risk for a portfolio of debt, equity, or correlation trading positions, the FDIC-supervised institution must calculate a specific-risk add-on for the portfolio under the standardized measurement method as described in [§ 324.210](/cfr/12/324.210.md).
  - (2) An FDIC-supervised institution must calculate a specific risk add-on under the standardized measurement method as described in [§ 324.210](/cfr/12/324.210.md) for all of its securitization positions that are not modeled under [§ 324.209](/cfr/12/324.209.md).

## 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.