Source: https://www.law.cornell.edu/cfr/text/12/217.152
Timestamp: 2019-05-27 10:05:13
Document Index: 77126472

Matched Legal Cases: ['§ 217', '§ 217', '§ 217', '§ 217', '§ 217', '§ 217', '§ 217', '§ 217']

12 CFR § 217.152 - Simple risk weight approach (SRWA). | CFR | US Law | LII / Legal Information Institute
Section 217.152. Simple risk weight approach (SRWA).
12 CFR § 217.152 - Simple risk weight approach (SRWA).
§ 217.152 Simple risk weight approach (SRWA).
(a)General. Under the SRWA, a Board-regulated institution's aggregate risk-weighted asset amount for its equity exposures is equal to the sum of the risk-weighted asset amounts for each of the Board-regulated institution's individual equity exposures (other than equity exposures to an investment fund) as determined in this section and the risk-weighted asset amounts for each of the Board-regulated institution's individual equity exposures to an investment fund as determined in § 217.154.
(b)SRWA computation for individual equity exposures. A Board-regulated institution must determine the risk-weighted asset amount for an individual equity exposure (other than an equity exposure to an investment fund) by multiplying the adjusted carrying value of the equity exposure or the effective portion and ineffective portion of a hedge pair (as defined in paragraph (c) of this section) by the lowest applicable risk weight in this section.
(1)Zero percent risk weight equity exposures. An equity exposure to an entity whose credit exposures are exempt from the 0.03 percent PD floor in § 217.131(d)(2) is assigned a zero percent risk weight.
(2)20 percent risk weight equity exposures. An equity exposure to a Federal Home Loan Bank or the Federal Agricultural Mortgage Corporation (Farmer Mac) is assigned a 20 percent risk weight.
(3)100 percent risk weight equity exposures. The following equity exposures are assigned a 100 percent risk weight:
(i)Community development equity exposures.
(A) For state member banks and bank holding companies, an equity exposure that qualifies as a community development investment under 12 U.S.C. 24 (Eleventh), excluding equity exposures to an unconsolidated small business investment company and equity exposures held through a consolidated small business investment company described in section 302 of the Small Business Investment Act of 1958 (15 U.S.C. 682).
(ii)Effective portion of hedge pairs. The effective portion of a hedge pair.
(iii)Non-significant equity exposures. Equity exposures, excluding significant investments in the capital of an unconsolidated institution in the form of common stock and exposures to an investment firm that would meet the definition of a traditional securitization were it not for the Board's application of paragraph (8) of that definition in § 217.2 and has greater than immaterial leverage, to the extent that the aggregate adjusted carrying value of the exposures does not exceed 10 percent of the Board-regulated institution's total capital.
(4)250 percent risk weight equity exposures. Significant investments in the capital of unconsolidated financial institutions in the form of common stock that are not deducted from capital pursuant to § 217.22(b)(4) are assigned a 250 percent risk weight.
(5)300 percent risk weight equity exposures. A publicly traded equity exposure (other than an equity exposure described in paragraph (b)(6) of this section and including the ineffective portion of a hedge pair) is assigned a 300 percent risk weight.
(6)400 percent risk weight equity exposures. An equity exposure (other than an equity exposure described in paragraph (b)(6) of this section) that is not publicly traded is assigned a 400 percent risk weight.
(7)600 percent risk weight equity exposures. An equity exposure to an investment firm that:
(i) Would meet the definition of a traditional securitization were it not for the Board's application of paragraph (8) of that definition in § 217.2; and
(c)Hedge transactions -
(1)Hedge pair. A hedge pair is two equity exposures that form an effective hedge so long as each equity exposure is publicly traded or has a return that is primarily based on a publicly traded equity exposure.
(2)Effective hedge. Two equity exposures form an effective hedge if the exposures either have the same remaining maturity or each has a remaining maturity of at least three months; the hedge relationship is formally documented in a prospective manner (that is, before the Board-regulated institution acquires at least one of the equity exposures); the documentation specifies the measure of effectiveness (E) the Board-regulated institution will use for the hedge relationship throughout the life of the transaction; and the hedge relationship has an E greater than or equal to 0.8. A Board-regulated institution must measure E at least quarterly and must use one of three alternative measures of E: