12 CFR § 1240.100 - Purpose, applicability, and principle of conservatism.
---
identifier: "/us/cfr/t12/s1240.100"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "12 CFR § 1240.100 - Purpose, applicability, and principle of conservatism."
title_number: 12
title_name: "Banks and Banking"
section_number: "1240.100"
section_name: "Purpose, applicability, and principle of conservatism."
chapter_name: "FEDERAL HOUSING FINANCE AGENCY"
subchapter_number: "C"
subchapter_name: "ENTERPRISES"
part_number: "1240"
part_name: "CAPITAL ADEQUACY OF ENTERPRISES"
positive_law: false
currency: "2026-04-05"
last_updated: "2026-04-05"
format_version: "1.1.0"
generator: "[email protected]"
authority: "12 U.S.C. 4511, 4513, 4513b, 4514, 4515, 4517, 4526, 4611-4612, 4631-36."
regulatory_source: "85 FR 82198, Dec. 17, 2020, unless otherwise noted."
cfr_part: "1240"
---
# 1240.100 Purpose, applicability, and principle of conservatism.
(a) *Purpose.* This subpart establishes:
(1) Minimum requirements for using Enterprise-specific internal risk measurement and management processes for calculating risk-based capital requirements; and
(2) Methodologies for the Enterprises to calculate their advanced approaches total risk-weighted assets.
(b) *Applicability.* (1) This subpart applies to each Enterprise.
(2) An Enterprise must also include in its calculation of advanced credit risk-weighted assets under this subpart all covered positions, as defined in subpart F of this part.
(c) *Principle of conservatism.* Notwithstanding the requirements of this subpart, an Enterprise may choose not to apply a provision of this subpart to one or more exposures provided that:
(1) The Enterprise can demonstrate on an ongoing basis to the satisfaction of FHFA 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 Enterprise appropriately manages the risk of each such exposure;
(3) The Enterprise notifies FHFA in writing prior to applying this principle to each such exposure; and
(4) The exposures to which the Enterprise applies this principle are not, in the aggregate, material to the Enterprise.