Purpose, applicability, and principle of conservatism.

§ 3.100 Purpose, applicability, and principle of conservatism. (a) Purpose. This subpart E establishes: (1) Minimum qualifying criteria for national banks or Federal savings associations using institution-specific internal risk measurement and management processes for calculating risk-based capital requirements; and (2) Methodologies for such national banks or Federal savings associations to calculate their total risk-weighted assets. (b) Applicability. (1) This subpart applies to a national bank or Federal savings association that: (i) Is a subsidiary of a global systemically important BHC, as identified pursuant to 12 CFR 217.402; (ii) Is a Category II national bank or Federal savings association; (iii) Is a subsidiary of a depository institution that uses the advanced approaches pursuant to this subpart (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR part 324 (FDIC), to calculate its risk-based capital requirements; (iv) Is a subsidiary of a bank holding company or savings and loan holding company that uses the advanced approaches pursuant to subpart E of 12 CFR part 217 to calculate its risk-based capital requirements; or (v) Elects to use this subpart to calculate its risk-based capital requirements. (2) A market risk national bank or Federal savings association 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 national bank or Federal savings association may choose not to apply a provision of this subpart to one or more exposures provided that: (1) The national bank or Federal savings association can demonstrate on an ongoing basis to the satisfaction of the OCC 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 national bank or Federal savings association appropriately manages the risk of each such exposure; (3) The national bank or Federal savings association notifies the OCC in writing prior to applying this principle to each such exposure; and (4) The exposures to which the national bank or Federal savings association applies this principle are not, in the aggregate, material to the national bank or Federal savings association. [78 FR 62157, 62273, Oct. 11, 2013, as amended at 80 FR 41415, July 15, 2015; 84 FR 59265, Nov. 1, 2019]