(a) Sovereign exposures -
(1) Exposures to the U.S. Government.
(i) Notwithstanding any other requirement in this subpart, a System institution must assign a 0-percent risk weight to:
(A) An exposure to the U.S. Government, its central bank, or a U.S. Government agency; and
(B) The portion of an exposure that is directly and unconditionally guaranteed by the U.S. Government, its central bank, or a U.S. Government agency. This includes a deposit or other exposure, or the portion of a deposit or other exposure that is insured or otherwise unconditionally guaranteed by the Federal Deposit Insurance Corporation or National Credit Union Administration.
(ii) A System institution must assign a 20-percent risk weight to the portion of an exposure that is conditionally guaranteed by the U.S. Government, its central bank, or a U.S. Government agency. This includes an exposure, or the portion of an exposure, that is conditionally guaranteed by the Federal Deposit Insurance Corporation or National Credit Union Administration.
(2) Other sovereign exposures. In accordance with Table 1 to § 628.32, a System institution must assign a risk weight to a sovereign exposure based on the Country Risk Classification (CRC) applicable to the sovereign or the sovereign's Organization for Economic Cooperation and Development (OECD) membership status if there is no CRC applicable to the sovereign.
Table 1 to § 628.32 - Risk Weights for Sovereign Exposures
| Risk weight (in percent) |
|
|---|---|
| CRC: | |
| 0-1 | 0 |
| 2 | 20 |
| 3 | 50 |
| 4-6 | 100 |
| 7 | 150 |
| OECD Member with no CRC | 0 |
| Non-OECD Member with no CRC | 100 |
| Sovereign Default | 150 |
(3) Certain sovereign exposures. Notwithstanding paragraph (a)(2) of this section, a System institution may assign to a sovereign exposure a risk weight that is lower than the applicable risk weight in table 1 to § 628.32 if:
(i) The exposure is denominated in the sovereign's currency;
(ii) The System institution has at least an equivalent amount of liabilities in that currency; and
(iii) The risk weight is not lower than the risk weight that the sovereign allows banking organizations under its jurisdiction to assign to the same exposures to the sovereign.
(4) Exposures to a non-OECD member sovereign with no CRC. Except as provided in paragraphs (a)(3), (5), and (6) of this section, a System institution must assign a 100-percent risk weight to a sovereign exposure if the sovereign does not have a CRC.
(5) Exposures to an OECD member sovereign with no CRC. Except as provided in paragraph (a)(6) of this section, a System institution must assign a 0-percent risk weight to an exposure to a sovereign that is a member of the OECD if the sovereign does not have a CRC.
(6) Sovereign default. A System institution must assign a 150-percent risk weight to a sovereign exposure immediately upon determining that an event of sovereign default has occurred, or if an event of sovereign default has occurred during the previous 5 years.
(b) Certain supranational entities and multilateral development banks (MDBs). A System institution must assign a 0-percent risk weight to an exposure to the Bank for International Settlements, the European Central Bank, the European Commission, the International Monetary Fund, or an MDB.
(c) Exposures to Government-sponsored enterprises (GSEs).
(1) A System institution must assign a 20-percent risk weight to an exposure to a GSE other than an equity exposure or preferred stock.
(2) A System institution must assign a 100-percent risk weight to preferred stock issued by a non-System GSE.
(3) Purchased equity investments (including preferred stock investments) in other System institutions do not receive a risk weight, because they are deducted from capital in accordance with § 628.22.
(d) Exposures to depository institutions, foreign banks, and credit unions -
(1) Exposures to U.S. depository institutions and credit unions. A System institution must assign a 20-percent risk weight to an exposure to a depository institution or credit union that is organized under the laws of the United States or any state thereof, except as otherwise provided in this paragraph (d). This risk weight applies to an exposure a System bank has to another financing institution (OFI) that is a depository institution or credit union organized under the laws of the United States or any state thereof or is owned and controlled by such an entity that guarantees the exposure. If the OFI exposure does not satisfy these requirements, it must be assigned a risk weight as a corporate exposure pursuant to paragraph (f)(1)(ii) or (f)(2) of this section.
(2) Exposures to foreign banks.
(i) Except as otherwise provided under paragraph (d)(2)(iv) of this section, a System institution must assign a risk weight to an exposure to a foreign bank, in accordance with table 2 to § 628.32, based on the CRC rating that corresponds to the foreign bank's home country or the OECD membership status of the foreign bank's home country if there is no CRC applicable to the foreign bank's home country.
Table 2 to § 628.32 - Risk Weights for Exposures to Foreign Banks
| Risk weight (in percent) |
|
|---|---|
| CRC: | |
| 0-1 | 20 |
| 2 | 50 |
| 3 | 100 |
| 4-7 | 150 |
| OECD Member with No CRC | 20 |
| Non-OECD with No CRC | 100 |
| Sovereign Default | 150 |
(ii) A System institution must assign a 20-percent risk weight to an exposure to a foreign bank whose home country is a member of the OECD and does not have a CRC.
(iii) A System institution must assign a 100-percent risk weight to an exposure to a foreign bank whose home country is not a member of the OECD and does not have a CRC, with the exception of self-liquidating, trade-related contingent items that arise from the movement of goods, and that have a maturity of 3 months or less, which may be assigned a 20-percent risk weight.
(iv) A System institution must assign a 150-percent risk weight to an exposure to a foreign bank immediately upon determining that an event of sovereign default has occurred in the bank's home country, or if an event of sovereign default has occurred in the foreign bank's home country during the previous 5 years.
(3) [Reserved]
(e) Exposures to public sector entities (PSEs) -
(1) Exposures to U.S. PSEs.
(i) A System institution must assign a 20-percent risk weight to a general obligation exposure to a PSE that is organized under the laws of the United States or any state or political subdivision thereof.
(ii) A System institution must assign a 50-percent risk weight to a revenue obligation exposure to a PSE that is organized under the laws of the United States or any state or political subdivision thereof.
(2) Exposures to foreign PSEs.
(i) Except as provided in paragraphs (e)(1) and (3) of this section, a System institution must assign a risk weight to a general obligation exposure to a foreign PSE, in accordance with Table 3 to § 628.32, based on the CRC that corresponds to the PSE's home country or the OECD membership status of the PSE's home country if there is no CRC applicable to the PSE's home country.
(ii) Except as provided in paragraphs (e)(1) and (3) of this section, a System institution must assign a risk weight to a revenue obligation exposure to a foreign PSE, in accordance with Table 4 to § 628.32, based on the CRC that corresponds to the PSE's home country; or the OECD membership status of the PSE's home country if there is no CRC applicable to the PSE's home country.
(3) A System institution may assign a lower risk weight than would otherwise apply under tables 3 and 4 to § 628.32 to an exposure to a foreign PSE if:
(i) The PSE's home country supervisor allows banks under its jurisdiction to assign a lower risk weight to such exposures; and
(ii) The risk weight is not lower than the risk weight that corresponds to the PSE's home country in accordance with table 1 to § 628.32.
Table 3 to § 628.32 - Risk Weights for Non-U.S. PSE General Obligations
| Risk weight (in percent) |
|
|---|---|
| CRC: | |
| 0-1 | 20 |
| 2 | 50 |
| 3 | 100 |
| 4-7 | 150 |
| OECD Member with No CRC | 20 |
| Non-OECD Member with No CRC | 100 |
| Sovereign Default | 150 |
Table 4 to § 628.32 - Risk Weights for Non-U.S. PSE Revenue Obligations
| Risk weight (in percent) |
|
|---|---|
| CRC: | |
| 0-1 | 50 |
| 2-3 | 100 |
| 4-7 | 150 |
| OECD Member with No CRC | 50 |
| Non-OECD Member with No CRC | 100 |
| Sovereign Default | 150 |
(4) Exposures to PSEs from an OECD member sovereign with no CRC.
(i) A System institution must assign a 20-percent risk weight to a general obligation exposure to a PSE whose home country is a OECD member sovereign with no CRC.
(ii) A System institution must assign a 50-percent risk weight to a revenue obligation exposure to a PSE whose country is an OECD member sovereign with no CRC.
(5) Exposures to PSEs whose home country is not an OECD member sovereign with no CRC. A System institution must assign a 100-percent risk weight to an exposure to a PSE whose home country is not a member of the OECD and does not have a CRC.
(6) A System institution must assign a 150-percent risk weight to a PSE exposure immediately upon determining that an event of sovereign default has occurred in a PSE's home country or if an event of sovereign default has occurred in the PSE's home country during the previous 5 years.
(f) Corporate exposures -
(1) 100-percent risk weight. Except as provided in paragraph (f)(2) of this section, a System institution must assign a 100-percent risk weight to all its corporate exposures. Assets assigned a risk weight under this provision include:
(i) Borrower loans such as agricultural loans and consumer loans, regardless of the corporate form of the borrower, unless those loans qualify for different risk weights under other provisions of this subpart D;
(ii) System bank exposures to OFIs that do not satisfy the requirements for a 20-percent risk weight pursuant to paragraph (d)(1) of this section or a 50-percent risk weight pursuant to paragraph (f)(2) of this section; and
(iii) Premises, fixed assets, and other real estate owned.
(2) 50-percent risk weight. Unless the OFI satisfies the requirements for a 20-percent risk weight pursuant to paragraph (d)(1) of this section, a System institution must assign a 50-percent risk weight to an exposure to an OFI that satisfies at least one of the following requirements:
(i) The OFI is investment grade or is owned and controlled by an investment grade entity that guarantees the exposure; or
(ii) The OFI meets capital, risk identification and control, and operational standards similar to the OFIs identified in paragraph (d)(1) of this section.
(g) Residential mortgage exposures.
(1) A System institution must assign a 50-percent risk weight to a first-lien residential mortgage exposure that:
(i) Is secured by a property that is either owner-occupied or rented;
(ii) Is made in accordance with prudent underwriting standards suitable for residential property, including standards relating to the loan amount as a percent of the appraised value of the property;
(iii) Is not 90 days or more past due or carried in nonaccrual status; and
(iv) Is not restructured or modified.
(2) A System institution must assign a 100-percent risk weight to a first-lien residential mortgage exposure that does not meet the criteria in paragraph (g)(1) of this section, and to junior-lien residential mortgage exposures.
(3) For the purpose of this paragraph (g), if a System institution holds the first-lien and junior-lien(s) residential mortgage exposures, and no other party holds an intervening lien, the System institution must combine the exposures and treat them as a single first-lien residential mortgage exposure.
(4) A loan modified or restructured solely pursuant to the U.S. Treasury's Home Affordable Mortgage Program is not modified or restructured for purposes of this section.
(h)-(j) [Reserved]
(k) Past due and nonaccrual exposures. Except for a sovereign exposure or a residential mortgage exposure, a System institution must determine a risk weight for an exposure that is 90 days or more past due or in nonaccrual status according to the requirements set forth in this paragraph (k).
(1) A System institution must assign a 150-percent risk weight to the portion of the exposure that is not guaranteed or that is not secured by financial collateral.
(2) A System institution may assign a risk weight to the guaranteed portion of a past due or nonaccrual exposure based on the risk weight that applies under § 628.36 if the guarantee or credit derivative meets the requirements of that section.
(3) A System institution may assign a risk weight to the portion of a past due or nonaccrual exposure that is collateralized by financial collateral based on the risk weight that applies under § 628.37 if the financial collateral meets the requirements of that section.
(l) Other assets.
(1) A System institution must assign a 0-percent risk weight to cash owned and held in all offices of the System institution or in transit; to gold bullion held in the System institution's own vaults or held in a depository institution's vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities; and to exposures that arise from the settlement of cash transactions (such as equities, fixed income, spot foreign exchange (FX), and spot commodities) with a central counterparty where there is no assumption of ongoing counterparty credit risk by the central counterparty after settlement of the trade.
(2) A System institution must assign a 20-percent risk weight to cash items in the process of collection.
(3) A System institution must assign a 100-percent risk weight to deferred tax assets (DTAs) arising from temporary differences in relation to net operating loss carrybacks.
(4) A System institution must assign a 100-percent risk weight to all MSAs.
(5) A System institution must assign a 100-percent risk weight to all assets that are not specifically assigned a different risk weight under this subpart and that are not deducted from tier 1 or tier 2 capital pursuant to § 628.22.
(6) [Reserved]
[81 FR 49779, July 28, 2016, as amended at 86 FR 54360, Oct. 1, 2021]