§ 217.100 Purpose, applicability, and principle of conservatism.

(a) Purpose. This subpart E establishes: (1) Minimum qualifying criteria for Board-regulated institutions using institution-specific internal risk measurement and management processes for calculating risk-based capital requirements; and (2) Methodologies for such Board-regulated institutions to calculate their total risk-weighted assets. (b) Applicability. (1) This subpart applies to: (i) A top-tier bank holding company or savings and loan holding company domiciled in the United States that: (A) Is not a consolidated subsidiary of another bank holding company or savings and loan holding company that uses this subpart to calculate its risk-based capital requirements; and (B) That: (1) Is identified as a global systemically important BHC pursuant to § 217.402; (2) Is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10; or (3) Has a subsidiary depository institution that is required, or has elected, to use 12 CFR part 3, subpart E (OCC), this subpart (Board), or 12 CFR part 324, subpart E (FDIC), to calculate its risk-based capital requirements; (ii) A state member bank that: (A) Is a subsidiary of a global systemically important BHC; (B) Is a Category II Board-regulated institution; (C) Is a subsidiary of a depository institution that uses 12 CFR part 3, subpart E (OCC), this subpart (Board), or 12 CFR part 324, subpart E (FDIC), to calculate its risk-based capital requirements; or (D) Is a subsidiary of a bank holding company or savings and loan holding company that uses this subpart to calculate its risk-based capital requirements; or (iii) Any Board-regulated institution that elects to use this subpart to calculate its risk-based capital requirements. (2) A market risk Board-regulated institution must exclude from its calculation of risk-weighted assets under this subpart the risk-weighted asset amounts of all covered positions, as defined in subpart F of this part (except foreign exchange positions that are not trading positions, over-the-counter derivative positions, cleared transactions, and unsettled transactions). (c) Principle of conservatism. Notwithstanding the requirements of this subpart, a Board-regulated institution may choose not to apply a provision of this subpart to one or more exposures provided that: (1) The Board-regulated institution can demonstrate on an ongoing basis to the satisfaction of the Board that not applying the provision would, in all circumstances, unambiguously generate a risk-based capital requirement for each such exposure greater than that which would otherwise be required under this subpart; (2) The Board-regulated institution appropriately manages the risk of each such exposure; (3) The Board-regulated institution notifies the Board in writing prior to applying this principle to each such exposure; and (4) The exposures to which the Board-regulated institution applies this principle are not, in the aggregate, material to the Board-regulated institution.