BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

SR 15-4

February 13, 2015

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE 

BANK AND TO FINANCIAL INSTITUTIONS SUPERVISED BY THE FEDERAL 

RESERVE

SUBJECT: Tool for Calculating Capital Requirements Using the Simplified Supervisory 

Formula Approach

Applicability: This tool is available for all financial institutions subject to the Federal Reserve 

Board’s regulatory capital rules. The tool is not a part of the regulatory capital rules or a 

component of regulatory reporting. Financial institutions may use the tool solely at their own 

discretion. This letter is not applicable to financial institutions subject to the Board’s Small Bank 

Holding Company Policy Statement.

The Board of Governors of the Federal Reserve System (the Board), the Federal Deposit 

Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the 

agencies) have developed an automated tool to assist financial institutions subject to the 

agencies’ regulatory capital rules1 in calculating risk-based capital requirements for individual 

securitization exposures. Specifically, institutions that use the rules’ Simplified Supervisory 

Formula Approach (SSFA)2 to calculate risk-based capital requirements for securitization 

exposures may use the tool, at their discretion, to calculate capital requirements for such 

exposures. A link to the tool appears at the bottom of this letter.

The SSFA is designed to apply relatively higher risk-based capital requirements to the 

more risky junior tranches of securitizations that are the first to absorb losses, and relatively 

lower requirements to the most senior tranches. The automated tool:

• is designed to reduce potential burden by helping institutions calculate risk-based 

capital for securitization exposures, and

• requires five inputs to calculate the risk-based capital requirement for a securitization 

exposure per the requirements of the SSFA. 

1 For the Board’s rules, see 12 CFR 217 (Regulation Q).

2 See 12 CFR 217.43 and 144.

Page 1 of 2

 
Financial institutions using this tool remain solely responsible for the accuracy of the 

reporting data produced with the assistance of this tool, as well as for ensuring compliance with 

the Board’s Regulation Q. Institutions are expected to have a comprehensive understanding of 

their securitization exposures and to conduct due diligence requirements in accordance with the 

requirements of Regulation Q and consistent with supervisory expectations related to investment 

activities and safe-and-sound banking practices.

Reserve Banks are asked to distribute this letter to institutions supervised by the Federal 

Reserve in their districts, as well as to appropriate supervisory and examination staff. Questions 

regarding the attached guidance should be addressed to staff in the Capital and Regulatory Policy

section: Thomas Boemio, Manager, at (202) 452-2982, or Page Conkling, Supervisory Financial 

Analyst, at (202) 912-4647. In addition, questions may be sent via the Board’s public website.3

Michael S. Gibson

Director

Related Link: SSFA calculation tool

3 http://www.federalreserve.gov/apps/contactus/feedback.aspx

Page 2 of 2