Consolidated Financial Statements for Holding Companies (AA HCs)

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SCHEDULE HC-R – REGULATORY CAPITAL
General Instructions for HC-R
The instructions for Schedule HC-R should be read in conjunction with the regulatory capital
rules issued by the Federal Reserve.
Under the Federal Reserve’s regulatory capital rules, assets and credit equivalent amounts of
derivatives and off-balance sheet items are assigned to one of several broad risk categories
according to the obligor, or, if relevant, the guarantor or the nature of the collateral. The
aggregate dollar or exposure amount in each risk category is then multiplied by the risk weight
associated with that category. The resulting weighted values from each of the risk categories are
added together, and generally this sum is the holding company’s total risk-weighted assets which
comprises the denominator of the risk-based capital ratio.
The term “exposure” generally refers to loans to, securities issued by, balances due from,
accrued interest receivable from, and all other exposures against the various entities with which
the reporting holding company conducts its business. Generally, the exposure amount for onbalance sheet assets is the carrying value. In the case of derivative contracts, the exposure
amount, or credit equivalent amount, is the sum of the current credit exposure (fair value of the
contract, if positive) and the potential future exposure, subject to any applicable netting
agreements. In the case of most off-balance sheet items, the exposure amount, or credit
equivalent amount, is determined by multiplying the face value or notional amount of the offbalance sheet item by a credit conversion factor.
The revised regulatory capital rules also provide a definition in § .2 for the term exposure
amount. The definition of exposure amount (discussed further below in these instructions) is
used to determine the amount of an exposure that holding companies will report and risk weight
on this schedule.
Credit Conversion Factors for Off-Balance Sheet Items – A summary of the credit conversion
factors (CCFs) follows. For further information on these factors, refer to the regulatory capital
rules. Note that where a holding company commits to provide a commitment, the holding
company may apply the lower of the two applicable CCFs. Where a holding company provides
a commitment structured as a syndication or participation, the holding company is only required
to calculate the exposure amount for its pro rata share. For off-balance sheet items reported in
Schedule HC-R, Part II, items 12 to 22, the reporting holding company would only be required to
report its pro rata share.
Off-balance sheet items subject to a zero percent conversion factor:
(1) Unused portions of commitments that are unconditionally cancellable at any time by the
holding company.
Off-balance sheet items subject to a 20 percent conversion factor:
(1) Commercial and similar letters of credit with an original maturity of one year or less,
including short-term, self-liquidating, trade-related contingent items that arise from the
movement of goods.
(2) Commitments with an original maturity of one year or less that are not unconditionally
cancelable.

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Off-balance sheet items subject to a 50 percent conversion factor:
(1) Transaction-related contingent items, including performance standby letters of credit, bid
bonds, performance bonds, and warranties.
(2) Commercial and similar letters of credit with an original maturity exceeding one year.
(3) Commitments with an original maturity exceeding one year that are not unconditionally
cancelable by the holding company, including underwriting commitments, and commercial
credit lines.
Off-balance sheet items subject to a 100 percent conversion factor:
(1) Financial standby letters of credit.
(2) Repo-style transactions, including off-balance sheet securities lending transactions, offbalance sheet securities borrowing transactions, securities purchased under agreements to
resell, and securities sold under agreements to repurchase.
(3) Guarantees, certain credit-enhancing representations and warranties, and forward
agreements.

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Part II: Risk-Weighted Assets
General Instructions for Part II
The instructions for Schedule HC-R, Part II, items 1 through 23 provide general directions for
the allocation of holding company balance sheet assets and credit equivalent amounts of
derivatives and off-balance sheet items, and unsettled transactions to the risk weight categories in
columns C through Q (and, for items 1 through 11 only, to the items adjusted from the totals
reported in Schedule HC-R, Part II, column A in column B). These instructions should provide
sufficient guidance for most holding companies for risk-weighting their balance sheet assets and
credit equivalent amounts. However, these instructions do not address every type of exposure.
Holding companies should review the Federal Reserve’s regulatory capital rules for the complete
description of the applicable capital requirements.
Exposure Amount Subject to Risk Weighting
In general, holding companies need to risk weight the exposure amount. The exposure amount is
defined in §.2 of the regulatory capital rules as follows:
(1) For the on-balance sheet component of an exposure,1 the holding company’s carrying value
of the exposure.
(2) For a security2 classified as AFS or HTM where the holding company has made the AOCI
opt-out election in Schedule HC-R, Part I, item 3(a), the carrying value for the exposure
(including net accrued but uncollected interest and fees)3 less any net unrealized gains on the
exposure plus any unrealized loss on the exposure included in AOCI.
(3) For AFS preferred stock classified as an equity security under GAAP where the holding
company has made the AOCI opt-out election in Schedule HC-R, Part I, item 3(a), the carrying
value less any net unrealized gains that are reflected in such carrying value, but are excluded
from the holding company’s regulatory capital components.
(4) For the off-balance sheet component of an exposure,4 the notional amount of the off-balance
sheet component multiplied by the appropriate CCF in §.33 of the regulatory capital rules.

1

Not including: (1) an available-for-sale (AFS) or held-to-maturity (HTM) security where the holding company has
made the Accumulated Other Comprehensive Income (AOCI) opt-out election in Schedule HC-R, Part I, item 3(a),
(2) an over-the-counter (OTC) derivative contract, (3) a repo-style transaction or an eligible margin loan for which
the holding company determines the exposure amount under §.37 of the regulatory capital rules, (4) a cleared
transaction, (5) a default fund contribution, or (6) a securitization exposure.
2

Not including: (1) a securitization exposure, (2) an equity exposure, or (3) preferred stock classified as an equity
security under generally accepted accounting principles (GAAP).
3

Where the holding company has made the AOCI opt-out election, accrued but uncollected interest and fees
reported in Schedule HC, item 11, “Other assets,” associated with AFS or HTM debt securities that are not
securitization exposures should be reported in Schedule HC-R, Part II, item 8, “All other assets.”
4

Not including: (1) an OTC derivative contract, (2) a repo-style transaction or an eligible margin loan for which the
holding company calculates the exposure amount under §.37 of the regulatory capital rules, (3) a cleared transaction,
(4) a default fund contribution, or (5) a securitization exposure,
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(5) For an exposure that is an OTC derivative contract, the exposure amount determined under
§.34 of the regulatory capital rules.
(6) For an exposure that is a derivative contract that is a cleared transaction, the exposure amount
determined under §.35 of the regulatory capital rules.
(7) For an exposure that is an eligible margin loan or repo-style transaction (including a cleared
transaction) for which the holding company calculates the exposure amount as provided in §.37,
the exposure amount determined under §.37 of the regulatory capital rules.
(8) For an exposure that is a securitization exposure, the exposure amount determined under §.42
of the regulatory capital rules.
As indicated in the definition in §.2 of the regulatory capital rules, carrying value means with respect
to an asset, the value of the asset on the balance sheet of the holding company determined in
accordance with GAAP.
Amounts to Report in Column B
The amount to report in column B will vary depending upon the nature of the particular item.
For items 1 through 8 and 11 of Schedule HC-R, Part II, column B should include the amount of
the reporting holding company’s on-balance sheet assets that are deducted or excluded (not risk
weighted) in the determination of risk-weighted assets. Column B should include assets that are
deducted from capital (subject to the transition provisions of the regulatory capital rules, as
applicable) such as goodwill; intangibles; gain on sale of securitization exposures; threshold
deductions above the 10 percent individual or 15 percent combined limits for (1) deferred tax
assets (DTAs) arising from temporary differences that could not be realized through net
operating loss carrybacks, (2) mortgage servicing assets (MSAs), net of associated deferred tax
liabilities (DTLs), and (3) significant investments in the capital of unconsolidated financial
institutions in the form of common stock; and any other assets that must be deducted in
accordance with the requirements of the Federal Reserve. Column B should also include items
that are excluded from the calculation of risk-weighted assets, such as the allowance for loan and
lease losses, allocated transfer risk reserves, and certain on-balance sheet asset amounts
associated with derivative contracts that are included in the calculation of the credit equivalent
amounts of the derivative contracts. In addition, for items 1 through 8 and 11 of Schedule HC-R,
Part II, column B should include any difference between the balance sheet amount of an onbalance sheet asset and its exposure amount as described above under “Exposure Amount
Subject to Risk Weighting.”
Note: For items 1 through 8 and 11 of Schedule HC-R, Part II, the sum of columns B through R
must equal the balance sheet asset amount reported in column A.
For items 9(a) through 9(d) of Schedule HC-R, Part II, the amount a reporting holding company
should report in column B will depend upon the risk weighting approach it uses to risk weight its
securitization exposures and whether the holding company’s has made the AOCI opt-out election
in Schedule HC-R, Part I, item 3(a). For each of items 9(a) through 9(d), the same mathematical
relationship described above will hold true, such that the sum of columns B through R must
equal the balance sheet asset amount reported in column A.

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If the holding company uses the 1,250 percent risk weight approach to risk weight an onbalance sheet securitization exposure, the holding company will report in column B the
difference between the carrying value of the exposure and the exposure amount that is to
be risk weighted. For example if a holding company has a securitization exposure that is
an AFS debt security with a $105 carrying value (i.e., fair value) including a $5
unrealized gain (in other words, a $100 amortized cost), the holding company would
report the following:
o If the bank has not made (or cannot make) the AOCI opt-out election, the holding
company would report zero in item 9(b), column B. The holding company would
report the $105 exposure amount to be risk weighted in item 9(b), column Q –
1250% risk weight.
o If the holding company has made the AOCI opt-out election, the holding
company would report any unrealized gain as a positive number in item 9(b),
column B, and any unrealized loss as a negative number in item 9(b), column B.
Therefore, in this example, the holding company would report $5 in item 9(b),
column B. Because the holding company reverses out the unrealized gain for
regulatory capital purposes because it has made the AOCI opt-out election, it does
not have to risk weight the gain. (Note: The holding company also would report
the $100 exposure amount to be risk weighted in item 9(b), column Q – 1250%
risk weight.
If the holding company uses the Simplified Supervisory Formula Approach (SSFA) or
the Gross-Up Approach to risk weight an on-balance sheet securitization exposure, the
holding company will report in column B the same amount that it reported in column A.

For item 10 of Schedule RC-R, Part II, the amount a reporting bank should report in column B
also will depend upon the risk weighting approach it uses to risk weight its securitization
exposures. If a bank uses the 1,250 percent risk weight approach to risk weight an off-balance
sheet securitization exposure, the bank will report in column B any difference between the
notional amount of the off-balance sheet securitization exposure that is reported in column A and
its exposure amount. If the bank uses the SSFA or the Gross-Up Approach to risk weight an offbalance sheet securitization exposure, the bank will report in column B the same amount that it
reported in column A. An example is presented in the instructions for Schedule RC-R, Part II,
item 10. For item 10 of Schedule RC-R, Part II, the sum of columns B through Q must equal the
amount of the off-balance sheet securitization exposures reported in column A.
For items 12 through 21 of Schedule HC-R, Part II, column B should include the credit
equivalent amounts of the reporting holding company’s derivative contracts and off-balance
sheet items that are covered by the regulatory capital rules. For the off-balance sheet items in
items 12 through 19, the credit equivalent amount to be reported in column B is calculated by
multiplying the face, notional, or other amount reported in column A by the appropriate CCF.
The credit equivalent amounts in column B are to be allocated to the appropriate risk-weight
categories in columns C through J (or to the securitization exposure collateral category in column
R, if applicable). For items 12 through 21 of Schedule HC-R, Part II, the sum of columns C
through J (plus column R, if applicable) must equal the credit equivalent amount reported in
column B.
Treatment of Collateral and Guarantees
a. Collateralized Transactions
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The rules for recognition of collateral are in §.37 and pertinent definitions in §.2 of the regulatory
capital rules. The regulatory capital rules define qualifying financial collateral as cash on
deposit, gold bullion, investment grade long- and short-term debt exposures (that are not
resecuritization exposures), publicly traded equity securities and convertible bonds, and money
market fund or other mutual fund shares with prices that are publicly quoted on a daily basis.
Holding companies may apply one of two approaches, as outlined in §.37, to recognize the riskmitigating effects of qualifying financial collateral:
(1) Simple Approach: can be used for any type of exposure. Under this approach, holding
companies may apply a risk weight to the portion of an exposure that is secured by the fair
value of the financial collateral based on the risk weight assigned to the collateral under §.32.
However, under this approach, the risk weight assigned to the collateralized portion of the
exposure may not be less than 20 percent, unless one of the following exceptions applies:


Zero percent risk weight - may be assigned to: an exposure to an OTC derivative
contract that is marked-to-market on a daily basis and subject to a daily margin
requirement, to the extent that the contract is collateralized to cash on deposit; to the
portion of an exposure collateralized by cash on deposit; to the portion of an exposure
collateralized by an exposure to a sovereign that qualifies for the zero percent risk
weight under §.32 and the holding company has discounted the fair value of the
collateral by 20 percent.



10 percent risk weight: may be assigned to an exposure to an OTC derivative contract
that is marked-to-market on a daily basis and subject to a daily margin requirement,
to the extent that the contract is collateralized by an exposure to a sovereign that
qualified for a zero percent risk weight under §.32.

(2) Collateral Haircut Approach: can be used only for repo-style transactions, eligible margin
loans, collateralized derivative transactions, and single-product netting sets of such
transactions. Under this approach, holding companies would apply either standard
supervisory haircuts or own internal estimates for haircuts to the value of the collateral. See
§.37(c) of the regulatory capital rules for a description of the calculation of the exposure
amount, standard supervisory market price volatility haircuts, and requirements for using
own internal estimates for haircuts.
Holding companies may use any approach described in §.37 that is valid for a particular type of
exposure or transaction; however, they must use the same approach for similar transactions or
exposures.
If an exposure is partially secured, that is, the market value (or in cases of using the Collateral
Haircut Approach, the adjusted market value) of the financial collateral is less than the face
amount of an asset or off-balance sheet exposure, only the portion that is covered by the market
value of the collateral is to be reported in the risk-weight category item appropriate to the type of
collateral. The uncovered portion of the exposure continues to be assigned to the initial riskweight category item appropriate to the exposure. The face amount of an exposure secured by
multiple types of qualifying collateral is to be reported in the risk-weight category items
appropriate to the collateral types, apportioned according to the market value of the types of
collateral.
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Exposures collateralized by deposits at the reporting institution
The portion of any exposure collateralized by deposits at the reporting institution would be
eligible for a zero percent risk weight. The remaining portion of the exposure that is not
collateralized by deposits should be risk-weighted according to the regulatory capital rules.
b. Guarantees and credit derivatives
The rules for recognition of guarantees and credit derivatives are in §.36 and pertinent definitions
are in §.2 of the regulatory capital rules. A holding company may recognize the credit risk
mitigation benefits of an eligible guarantee or eligible credit derivative by substituting the risk
weight associated with the protection provider for the risk weight assigned to the exposure.
Please refer to the definitions of eligible guarantee, eligible guarantor, and eligible credit
derivative in §.2 of the regulatory capital rules. Note that in the definition of eligible guarantee,
where the definition discusses contingent guarantees, only contingent guarantees of the U.S.
government or its agencies are recognized.
The coverage amount provided by an eligible guarantee or eligible credit derivative will need to
be adjusted downward if:


The residual maturity of the credit risk mitigant is less than that of the hedged exposure
(maturity mismatch adjustment), see §.36(c);



The credit risk mitigant does not include as a credit event a restructuring of the hedged
exposure involving forgiveness or postponement of principal, interest, or fees that results
in a credit loss event (that is, a charge-off, specific provision, or other similar debit to the
profit and loss account), see §.36(d); or



The credit risk mitigant is denominated in a currency different from that in which the
hedged exposure is denominated (currency mismatch adjustment), see §.36(e).

Exposures covered by Federal Deposit Insurance Corporation (FDIC) loss sharing agreements
The portion of any exposure covered by an FDIC loss sharing agreement would be eligible for a
20 percent risk weight. The remaining uncovered portion of the exposure should be riskweighted according to the regulatory capital rules.
Treatment of Equity Exposures
The treatment of equity exposures are outlined in §.51 through §.53 of the regulatory capital
rules. Holding companies must use different methodologies to determine risk weighted assets
for their equity exposures:
 The Simple Risk Weight Approach (SRWA), which must be used for all types of equity
exposures that are not equity exposures to a mutual fund or other investment fund, and
 Full look-through, simple modified look-through, and alternative modified look-through
approaches for equity exposures to mutual funds and other investment funds.
Treatment of stable value protection
The regulatory capital rules define stable value protection (SVP) in §.51(a)(3).
A holding company that purchases SVP on an investment in a separate account must treat the
portion of the carrying value of the investment attributable to the SVP as an exposure to the
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provider of the protection. The remaining portion of the carrying value of the investment must
be treated as an equity exposure to an investment fund.
A holding company that provides SVP must treat the exposure as an equity derivative with an
adjusted carrying value equal to the sum of the on-balance and off-balance sheet adjusted
carrying value.
Adjusted carrying value
The adjusted carrying value of an equity exposure is equal to:
 On-balance sheet equity exposure: the carrying value of the exposure.
 On-balance sheet equity exposure that is classified as AFS where the holding
company has made the AOCI opt-out election: the carrying value of the exposure less
any net unrealized gains on the exposure that are reflected in the carrying value but
excluded from regulatory capital.
 Off-balance sheet portion of an equity exposure (that is not an equity commitment):
the effective notional principal amount5 of the exposure minus the adjusted carrying
value of the on-balance sheet component of the exposure.
For an equity commitment (a commitment to purchase an equity exposure), the effective notional
principal amount must be multiplied by the following CCFs: 20 percent for conditional equity
commitments with an original maturity of one year or less, 50 percent for conditional equity
commitments with an original maturity of more than one year, and 100 percent for unconditional
equity commitments.
Equity exposure risk weighting methodologies
(1) Simple Risk Weight Approach (SWRA): must be used for all types of equity exposures that
are not equity exposures to a mutual fund or other investment fund. Under this approach,
holding companies must determine the risk weighted asset amount of an individual equity
exposure by multiplying (1) the adjusted carrying value of the exposure or (2) the effective
portion and ineffective portion of a hedge pair by the lowest possible risk weight below:


Zero percent risk weight – an equity exposure to a sovereign, Bank for International
Settlements, the European Central Bank, the European Commission, the International
Monetary Fund, a multilateral development bank (MDB), and any other entity whose
credit exposures receive a zero percent risk weight under §.32 of the regulatory
capital rules.



20 percent risk weight: an equity exposure to a public sector entity (PSE), Federal
Home Loan Bank, and the Federal Agricultural Mortgage Corporation (Farmer Mac).



100 percent risk weight: equity exposures to:
o Certain qualified community development investments,
o The effective portion of hedge pairs, and
o Non-significant equity exposures, to the extent that the aggregated carrying value
of the exposures does not exceed 10 percent of total capital. To utilize this risk

The regulatory capital rules define the “effective notional principal amount” as an exposure of equivalent size to a
hypothetical on-balance sheet position in the underlying equity instrument that would evidence the same change in
fair value (measured in dollars) given a small change in the price of the underlying equity instrument.
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weight, the holding company must aggregate the following equity exposures:
unconsolidated small business investment companies or held through consolidated
small business investment companies; publicly traded (including those held
indirectly through mutual funds or other investment funds); and non-publicly
traded (including those held indirectly through mutual funds or other investment
funds).


250 percent risk weight: significant investments in the capital of unconsolidated
financial institutions in the form of common stock that are not deducted from capital.
This risk weight takes effect in 2018. Before 2018, report such significant
investments in the 100 percent risk weight category.



300 percent risk weight: publicly traded equity exposures.



400 percent risk weight: equity exposures that are not publicly traded.



600 percent risk weight: an equity exposure to an investment firm, provided that the
investment firm would (1) meet the definition of traditional securitization in §.2 of
the regulatory capital rules were it not for the application of paragraph (8) of the
definition and (2) has greater than immaterial leverage.

(2) Full look-through approach: used only for equity exposures to a mutual fund or other
investment fund. Requires a minimum risk weight of 20 percent. Under this approach,
holding companies calculate the aggregate risk-weighted asset amounts of the carrying value
of the exposures held by the fund as if they were held directly by the holding company
multiplied by the holding company’s proportional ownership share of the fund.
(3) Simple modified look-through approach: used only for equity exposures to a mutual fund or
other investment fund. Requires a minimum risk weight of 20 percent. Under this approach,
risk-weighted assets for an equity exposure is equal to the exposure’s adjusted carrying value
multiplied by the highest risk weight that applies to any exposure the fund is permitted to
hold under the prospectus, partnership agreement, or similar agreement that defines the funds
permissible investments.
(4) Alternative modified look-through approach: used only for equity exposures to a mutual fund
or other investment fund. Requires a minimum risk weight of 20 percent. Under this
approach, holding companies may assign the adjusted carrying value on a pro rata basis to
different risk weight categories based on the limits in the fund’s prospectus, partnership
agreement, or similar contract that defines the fund’s permissible investments.
Treatment of Sales of 1-4 Family Residential First Mortgage Loans with Credit-Enhancing
Representations and Warranties
When a holding company transfers mortgage loans with credit-enhancing representations and
warranties in a transaction that qualifies for sale accounting under GAAP, the holding company
will need to report and risk weight those exposures. The definition of “credit-enhancing
representations and warranties” (CERWs) is found in §.2 of the regulatory capital rules. Many
CERWs should be treated as securitization exposures for purposes of risk weighting. However,
those CERWs that do not qualify as securitization exposures receive a 100 percent CCF as
indicated in §.33 of the regulatory capital rules. For example, if the holding company has agreed
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to repurchase the loans that it has sold, it will generally need to risk weight those loans in
Schedule HC-R, Part II, item 17 until the warranties expire. Note that CERWs do not include
certain early default clauses and similar warranties that permit the return of, or premium refund
clauses covering, 1-4 family residential mortgage loans that qualify for a 50 percent risk weight
provided the warranty period does not exceed 120 days from the date of transfer.
Example: A holding company sells $100 in qualifying 1-4 family residential first
mortgage loans and agrees to repurchase them in case of early default for up to 180 days.
This warranty exceeds the 120 day limit, and therefore the full $100 should be reported in
Schedule HC-R, Part II, item 17 until the warranty expires.
If the holding company has made a CERW that is limited or capped (e.g., a warranty to cover
first losses on loans up to a set amount that is less than the full loan amount), such warranties are
regarded as securitization exposures under the regulatory capital rules as they represent a
transaction that has been separated into at least two tranches reflecting different levels of
seniority for credit risk. (Refer to the definitions of securitization exposure, synthetic
securitization, traditional securitization, and tranche in §.2 of the regulatory capital rules). The
holding company will need to report and risk weight these warranties in Schedule HC-R, Part II,
item 10, as off-balance sheet securitization exposures.
Example: A holding company sells $100 in qualifying 1-4 family residential first
mortgage loans and agrees to compensate the buyer for losses up to $2 if the loans default
during the first 12 months. Twelve months exceeds the 120-day limit and therefore the
agreement is a CERW. The CERW is also a securitization exposure because the $2 is
effectively a first loss tranche on a $100 transaction.
For purposes of reporting this transaction in Schedule HC-R, Part II, item 10, the holding
company should report $100 in column A, an adjustment of $98 in column B, and then $2
in column Q as an exposure amount that is risk weighted by applying a 1,250 percent risk
weight (if the holding company does not use the Simplified Supervisory Formula
Approach (SSFA) or the Gross-Up Approach for purposes of risk weighting its
securitization exposures). The holding company will not need to report any amount in
column T or U of Schedule HC-R, Part II, item 10, unless it uses the SSFA or Gross-Up
Approach for calculating the risk weighted asset amount for this transaction.
If the holding company uses either the SSFA or Gross-Up Approach to risk weight the $2
exposure, the holding company should report $100 in both column A and column B. In
columns T or U, it would report the risk-weighted asset amount calculated by using either
the SSFA or Gross-Up Approach, respectively.
Treatment of Exposures to Sovereign Entities and Foreign Banks
These instructions contain several references to Country Risk Classifications (CRC) used by the
Organization for Economic Cooperation and Development (OECD). The CRC methodology
classifies countries into one of eight risk categories (0-7), with countries assigned to the zero
category having the lowest possible risk assessment and countries assigned to the 7 category
having the highest possible risk assessment. The OECD regularly updates CRCs for more than
150 countries and makes the assessments publicly available on its website.6 The OECD does not
6

See http://www.oecd.org/trade/xcred/crc.htm.
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assign a CRC to every country; for example, it does not assign a CRC to a number of major
economies; it also does not assign a CRC to many smaller countries. As such, the table below
also provides risk weights for countries with no CRC based on whether or not those particular
countries are members of the OECD. In addition, there is a higher risk weight of 150 percent for
any country that has defaulted on its sovereign debt within the past 5 years, regardless of the
CRC rating.
Risk weights for reported balance sheet (items 1 through 8) and off-balance sheet and other
(items 12 through 22) exposures are to be assigned based upon the tables below:


Exposures to foreign central governments (including foreign central banks):

0-1
2
Home Country
3
CRC
4-6
7
OECD Member with No CRC
Non-OECD Member with No CRC
Countries with Sovereign Default in
Previous Five Years



0-1
2
3
4-7
OECD Member with No CRC
Non-OECD Member with No CRC
Countries with Sovereign Default in
Previous Five Years

Risk Weight
(%)
20
50
100
150
20
100
150

General obligation exposures to foreign public sector entities:

0-1
2
3
4-7
OECD Member with No CRC
Non-OECD Member with No CRC
Countries with Sovereign Default in
Previous Five Years

Home Country
CRC



150

Exposures to foreign banks:

Home Country
CRC



Risk Weight
(%)
0
20
50
100
150
0
100

Risk Weight
(%)
20
50
100
150
20
100
150

Revenue obligation exposures to foreign public sector entities:
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0-1
2-3
4-7
OECD Member with No CRC
Non-OECD Member with No CRC
Countries with Sovereign Default in
Previous Five Years

Home Country
CRC

Risk Weight
(%)
50
100
150
50
100
150

All risk-weight categories pertaining to exposures to central foreign governments:
 All exposures to foreign central governments may be assigned a lower risk weight if the
following conditions are met: (1) the exposures are denominated in the particular foreign
country’s local currency; (2) the holding company has at least equivalent liabilities in that
currency; and (3) the risk weight is not lower than the risk weight that particular foreign
country allows under its jurisdiction to assign to the same exposures to that country.
Summary of Risk Weights for Exposures to Government and Public Sector Entities
The following are some of the most common exposures to government and public sector entities
and the risk weights that apply to them:
Column C – 0% column:
 All exposures (defined broadly to include securities, loans, and leases) that are direct
exposures to, or the portion of exposures that are directly and unconditionally guaranteed
by, the U.S. Government or U.S. Government agencies. This includes the portions of
deposits insured by the Federal Deposit Insurance Corporation (FDIC) or the National
Credit Union Administration (NCUA).
 Exposures that are collateralized by cash on deposit in the reporting holding company.
 Exposures that are collateralized by securities issued or guaranteed by the U.S.
Government, or other sovereign governments that qualify for the zero percent risk
weight. Collateral value must be adjusted under §.37 of the regulatory capital rules.
 Exposures to, and the portions of exposures guaranteed by, the Bank for International
Settlements, the European Central Bank, the European Commission, the International
Monetary Fund, or an MDB (as specifically defined in §.2 of the regulatory capital rules).
Column G – 20% column:
 The portion of exposures that are conditionally guaranteed by the U.S. Government or
U.S. Government agencies. This includes exposures, or the portions of exposures,
conditionally guaranteed by the FDIC or the NCUA.
 The portion of exposures that are collateralized by cash on deposit in the holding
company or by securities issued or guaranteed by the U.S. Government or U.S.
Government agencies that are not included in zero percent column.
 General obligation exposures to states, municipalities, and other political subdivisions of
the United States.
 Exposures to U.S. government sponsored entities (GSEs) other than equity exposures or
preferred stock, and risk sharing securities.
Column H – 50% column:
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Revenue obligation exposures to states, municipalities, and other political subdivisions of
the United States.

Column I – 100% column:
 Preferred stock of U.S. GSEs.

Risk Weighted Assets for Securitization Exposures
Under the regulatory capital rules, three separate approaches are available for setting the
regulatory capital requirements for securitization exposures, as defined in §.2 of the regulatory
capital rules. Securitization exposures include asset-backed and mortgage-backed securities,
other positions in securitization transactions, re-securitizations, and structured finance programs7
(except credit-enhancing interest-only (CEIO) strips). In general, under each of the three
approaches, the risk-based capital requirement for a position in a securitization or structured
finance program (hereafter referred to collectively as a securitization) is computed by
multiplying the calculated amount of the position by the appropriate risk weight. The three
approaches to determining the proper risk weight for a securitization exposure are the SSFA, the
Gross-Up Approach, or the 1,250 Percent Risk Weight Approach.
If a securitization exposure is not an after-tax gain-on-sale resulting from a securitization that
requires deduction, or the portion of a CEIO strip that does not constitute an after-tax gain-onsale,8 a holding company may assign a risk weight to the securitization exposure using the SSFA
if certain requirements are met. If a holding company is not subject to Subpart F (the market risk
capital rule) of the regulatory capital rules, it may instead choose to assign a risk weight to the
securitization exposure using the Gross-Up Approach if certain requirements are met. However,
the holding company must apply either the SSFA or the Gross-Up Approach consistently across
all of its securitization exposures. However, if the holding company cannot, or chooses not to,
apply the SSFA or the Gross-Up Approach to an individual securitization exposure, the holding
company must assign a 1,250 percent risk weight to that exposure.
Both traditional and synthetic securitizations must meet certain operational requirements before
applying either the SSFA or the Gross-Up Approach. Furthermore, holding companies must
complete certain due diligence requirements and satisfactorily demonstrate a comprehensive
understanding of the features of the securitization exposure that would materially affect the
performance of the exposure. If these due diligence requirements are not met, the holding
company must assign the securitization exposure a risk weight of 1,250 percent. The holding
company’s analysis must be commensurate with the complexity of the securitization exposure
and the materiality of the exposure in relation to its capital. Holding companies should refer to
§.41 of the regulatory capital rules to review the details of these operational and due diligence
requirements.
For example, a holding company not subject to the market risk capital rule has 12 securitization
exposures. The operational and due diligence requirements have been met for 10 of the
exposures, to which the holding company applies the Gross-Up Approach. The holding
7

Structured finance programs include, but are not limited to, collateralized debt obligations.

8

Consistent with the regulatory capital rules, a holding company must deduct from common equity tier 1 capital any
after-tax gain-on-sale resulting from a securitization and must apply a 1,250 percent risk weight to the portion of a
CEIO strip that does not constitute an after-tax gain-on-sale.
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company then assigns a 1,250 percent risk weight to the other two exposures. Alternatively, the
holding company could assign a 1,250 percent risk weight to all 12 securitization exposures.
a. Exposure Amount Calculation
The exposure amount of an on-balance sheet securitization exposure that is not an available-forsale or held-to-maturity security where the holding company has made the Accumulated Other
Comprehensive Income (AOCI) opt-out election in Schedule HC-R, Part I, item 3(a), a repostyle transaction, an eligible margin loan, an over-the-counter (OTC) derivative contract, or a
cleared transaction is equal to the carrying value of the exposure.
The exposure amount of an off-balance sheet securitization exposure that is not a repo-style
transaction, an eligible margin loan, a cleared transaction (other than a credit derivative), an OTC
derivative contract (other than a credit derivative), or an exposure to an asset-backed commercial
paper (ABCP) program is the notional amount of the exposure.
For an off-balance sheet securitization exposure to an asset-backed commercial paper (ABCP)
program, such as an eligible ABCP liquidity facility, the notional amount may be reduced to the
maximum potential amount that the holding company could be required to fund given the ABCP
program’s current underlying assets (calculated without regard to the current credit quality of
those assets). An exposure amount of an eligible ABCP liquidity facility for which the SSFA
does not apply is calculated by multiplying the notional amount of the exposure by a CCF of 50
percent. An exposure amount of an eligible ABCP liquidity facility for which the SSFA does
apply is calculated by multiplying the notional amount of the exposure by a CCF of 100 percent.
The exposure amount of a securitization exposure that is a repo-style transaction, eligible margin
loan, or derivative contract (other than a credit derivative) is the exposure amount of the
transaction as calculated using the instructions for calculating the exposure amount of OTC
derivatives or collateralized transactions outlined in §.34 or §.37, respectively, of the regulatory
capital rules.
If a holding company has multiple securitization exposures that provide duplicative coverage to
the underlying exposures of a securitization, the holding company is not required to hold
duplicative risk-based capital against the overlapping position. Instead, the holding company
may apply to the overlapping position the applicable risk-based capital treatment that results in
the highest risk-based capital requirement.
If a holding company provides support to a securitization in excess of the holding company’s
contractual obligation to provide credit support to the securitization (implicit support) it must
include in risk-weighted assets all of the underlying exposures associated with the securitization
as if the exposures had not been securitized and must deduct from common equity tier 1 capital
any after-tax gain-on-sale resulting from the securitization.
b. Simplified Supervisory Formula Approach (SSFA)
To use the SSFA to determine the risk weight for a securitization exposure, a holding company
must have data that enables it to accurately assign the parameters. The data used to assign the
parameters must be the most currently available data and no more than 91 calendar days old. A
holding company that does not have the appropriate data to assign the parameters must assign a

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risk weight of 1,250 percent to the exposure. See the operational requirements outlined in §.43 of
the regulatory capital rules for further instructions.
To calculate the risk weight for a securitization exposure using the SSFA, a holding company
must have accurate information on the following five inputs to the SSFA calculation:


Parameter KG is the weighted-average (with unpaid principal used as the weight for each
exposure) total capital requirement of the underlying exposures calculated. KG is
expressed as a decimal value between zero and 1 (that is, an average risk weight of 100
percent represents a value of KG equal to .08).



Parameter W is the ratio of the sum of the dollar amounts of any underlying exposures
within the securitized pool to the ending balance, measured in dollars, of underlying
exposures, that meet any of the following criteria: (1) 90 days or more past due; (2)
subject to a bankruptcy or insolvency proceeding; (3) in the process of foreclosure; (4)
held as real estate owned; (5) has contractually deferred interest payments for 90 days or
more (other than in the case of deferments on federally guaranteed student loans and
certain consumer loans deferred according to provisions in the contract); or (6) is in
default. Parameter W is expressed as a decimal value between zero and one.



Parameter A is the attachment point for the exposure, which represents the threshold at
which credit losses will first be allocated to the exposure. Parameter A equals the ratio of
the current dollar amount of underlying exposures that are subordinated to the exposure
of the holding company to the current dollar amount of underlying exposures. Any
reserve account funded by the accumulated cash flows from the underlying exposures
that is subordinated to the holding company’s securitization exposure may be included in
the calculation of parameter A to the extent that cash is present in the account. Parameter
A is expressed as a decimal value between zero and one.



Parameter D is the detachment point for the exposure, which represents the threshold at
which credit losses of principal allocated to the exposure would result in a total loss of
principal. Parameter D equals parameter A plus the ratio of the current dollar amount of
the securitization exposures that are pari passu with the exposure (that is, have equal
seniority with respect to credit risk) to the current dollar amount of the underlying
exposures. Parameter D is expressed as a decimal value between zero and one.



A supervisory calibration parameter, p, is equal to 0.5 for securitization exposures that
are not resecuritization exposures and equal to 1.5 for resecuritization exposures.

There are three steps to calculating the risk weight for a securitization using the SSFA. First, a
holding company must complete the following equations using the previously described
parameters:
𝐾𝐴 = (1 − 𝑊 ) ∙ 𝐾𝐺 + ( 0.5 ∙ 𝑊)
1
𝑎= −
𝑝 ∙ 𝐾𝐴
𝑢 = 𝐷 − 𝐾𝐴
𝑙 = max(𝐴 − 𝐾𝐴 , 0)
𝑒 = 2.71828, the base of the natural logarithms
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Second, using the variables calculated in first step, find the value of KSSFA using the formula
below:
𝐾𝑆𝑆𝐹𝐴

𝑒 𝑎∙𝑢 − 𝑒 𝑎∙𝑙
=
𝑎(𝑢 − 𝑙)

Third, the risk weight of any particular securitization exposure (expressed as a percent) will be
equal to:
𝐾𝑆𝑆𝐹𝐴 × 1,250
To determine the risk-based capital requirement under the SSFA, multiply the exposure amount
by the higher of either (1) the calculated risk weight or (2) a 20 percent risk weight.
For purposes of reporting in Schedule HC-R, Part II, items 9 and 10, a holding company would
report in Column T the risk-weighted asset amount calculated under the SSFA for its
securitization exposures.
c. Gross-Up Approach
A holding company that is not subject to the market risk capital rule (Subpart F) in the regulatory
capital rules may apply the gross-up approach instead of the SSFA to determine the risk weight
of its securitization exposures, provided that it applies the gross-up approach consistently to all
of its securitization exposures.
To calculate the risk weight for a securitization exposure using the gross-up approach, a holding
company must calculate the following four inputs:
(1) Pro rata share, which is the par value of the holding company’s securitization exposure as
a percent of the par value of the tranche in which the securitization exposure resides.
(2) Enhanced amount, which is the par value of the tranches that are more senior to the
tranche in which the holding company’s securitization resides.
(3) Exposure amount of the holding company’s securitization exposure.
(4) Risk weight, which is the weighted-average risk weight of underlying exposures in the
securitization pool.
The holding company would calculate the credit equivalent amount which is equal to the sum of
the exposure amount of the holding company’s securitization exposure (3) and the pro rata share
(1) multiplied by the enhanced amount (2).
A holding company must assign the higher of the weighted-average risk weight (4) or a 20
percent risk weight to the securitization exposure using the gross-up approach.
To determine the risk-based capital requirement under the gross-up approach, multiply the higher
of the two risk weights by the credit equivalent amount. These steps are outlined in the
worksheet below:
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Gross-Up Approach Worksheet to Calculate the Capital Charge for a Securitization
Exposure that is Not a Senior Exposure9
(a) Currently outstanding par value of the holding company’s
non-senior securitization exposure divided by the currently
outstanding par value of the entire tranche (e.g., 60%10)
(b) Currently outstanding par value of the more senior positions in
the securitization that are supported by the tranche in which the
holding company owns a non-senior securitization exposure
(c) Pro rata share of the more senior positions currently outstanding
in the securitization that are supported by the holding company’s
non-senior securitization exposure: enter (b) multiplied by (a)
(d) Face amount11 of the holding company’s non-senior
securitization exposure
(e) Enter the sum of (c) and (d)
(f) Enter the weighted average risk weight applicable to
the assets underlying the securitization
(g) Risk-weighted asset amount of the holding company’s
non-senior securitization exposure: enter the higher of
 (d) multiplied by 20%, or
 (e) multiplied by (f)
(h) Capital charge for the risk-weighted asset amount of the
holding company’s non-senior securitization exposure:
enter (g) multiplied by 8%
For purposes of reporting its non-senior securitization exposures in Schedule HC-R, Part II,
items 9 and 10, a holding company would report in Column U the risk-weighted asset amount
calculated in line (g) on the Gross-Up Approach worksheet. For a senior securitization exposure,
a holding company would report in column U the face amount of its exposure12 multiplied by the
weighted-average risk weight of the securitization’s underlying exposures, subject to a 20
percent risk-weight floor.
Reporting in Schedule HC-R, Part II, When Using the Gross-Up Approach:

9

A senior securitization exposure means a securitization exposure that has a first priority claim on the cash flows
from the underlying exposures, without considering amounts due under interest rate or currency contracts, fees or
other similar payments due. Time tranching (that is, maturity differences) also is not considered when determining
whether a securitization exposure is a senior securitization exposure.
10

For example, if the currently outstanding par value of the entire tranche is $100 and the currently outstanding par
value of the holding company’s subordinated security is $60, then the holding company would enter 60% in (a).
11

For risk-based capital purposes, if the holding company has made the AOCI opt-out election in Schedule HC-R,
Part I, item 3(a), the “face amount” of an available-for-sale security and a held-to-maturity security is its amortized
cost; the “face amount” of a trading security is its fair value. If the holding company has not made or cannot make
the AOCI opt-out election, the “face amount” of an HTM security is its amortized cost; the “face amount” of an AFS
security or a trading security is its fair value.
12

See footnote 11.
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If the holding company’s non-senior security is a held-to-maturity securitization exposure, the
amortized cost of this security is included on the Report of Condition balance sheet in Schedule
HC, item 2(a), “Held-to-maturity securities,” and on the regulatory capital schedule in columns
A and B of Schedule HC-R, Part II, item 9(a), “On-balance sheet securitization exposures –
Held-to-maturity securities.” The risk-weighted asset amount from line (g) in the Gross-Up
Approach Worksheet above is reported in column U of Schedule HC-R, Part II, item 9(a).
If the holding company’s non-senior security is an available-for-sale securitization exposure, the
fair value of this security is included on the Report of Condition balance sheet in Schedule HC,
item 2(b), “Available-for-sale securities,” and on the regulatory capital schedule in column A of
Schedule HC-R, Part II, item 9(b), “On-balance sheet securitization exposures – Available-forsale securities.” For further information on the reporting of AFS securitization exposures in
column B refer to the instructions for Schedule HC-R, Part II, item 9(b) because the amount
reported in column B depends on whether the holding company has made the AOCI opt-out
election in Schedule HC-R, Part I, item 3(a). For non-senior AFS securitization exposures, the
risk-weighted asset amount from line (g) in the Gross-Up Approach Worksheet above is reported
in column U of Schedule HC-R, Part II, item 9(b).
If the holding company’s subordinated security is a trading securitization exposure, the fair value
of this security is included on the Report of Condition balance sheet in Schedule HC, item 5,
“Trading assets,” and on the regulatory capital schedule in column A of Schedule HC-R, Part II,
item 9(c), “On-balance sheet securitization exposures - Trading assets that receive standardized
charges.” A trading security is risk-weighted using its fair value if the holding company is not
subject to the market risk capital rule. The risk-weighted asset amount from line (g) in the
Gross-Up Approach Worksheet above is reported in column U of Schedule HC-R, Part II, item
9(c).
d. 1,250 Percent Risk Weight Approach
If the holding company cannot, or chooses not to apply the SSFA or the Gross-Up Approach to
the securitization exposure, the holding company must assign a 1,250 percent risk weight to the
exposure.
Securitization exposure reporting in HC-R, Part II
Securitization exposure reporting depends on the methodology the holding company will use to
risk weight the exposure.
For example, if a holding company plans to apply the 1,250 percent risk weight to its exposures,
the amount reported in column Q should match the amount reported in column A (less any
adjustments, such as that for an allocated transfer risk reserve (ATRR)). For any securitization
exposure risk-weighted using the 1,250 percent risk weight, the sum of columns B and Q should
equal column A.
(Column B)
(Column A) Adjustments to
Totals
Totals
Reported in
Column A
9.

(Column Q)
Exposure
Amount
1250%

(Column T)
(Column U)
Total Risk-Weighted Asset
Amount by Calculation
Methodology
SSFA
Gross-Up

On-balance sheet
securitization exposures
BHCK

BHCK

BHCK

BHCK

BHCK
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Held-to-maturity
securities

$100

$0

$100

$0

$0

9.a.

If a holding company – regardless if it makes the AOCI opt-out election - is applying the SSFA
or Gross-Up Approach, the reporting is significantly different due to the fact that the holding
company reports the risk weighted assets amount in columns T or U.
In the case where a holding company has a securitization exposure with a balance sheet value of
$100, it would report $100 in both columns A and B. If the holding company applies the SSFA
and calculates a risk-weighted asset exposure of $20 for that securitization, the holding company
would report $20 in column T. Since it is using the SSFA for all its securitization exposures, the
holding company must report $0 in column U.
(Column B)
(Column A) Adjustments to
Totals
Totals
Reported in
Column A

(Column Q)
Exposure
Amount
1250%

(Column T)
(Column U)
Total Risk-Weighted Asset
Amount by Calculation
Methodology
SSFA
Gross-Up

On-balance sheet
9.
securitization exposures
a.

Held-to-maturity
securities

BHCK

BHCK

BHCK

BHCK

BHCK

$100

$100

$0

$20

$0

9.a.

A holding company, at its discretion, could also use both the 1,250 percent risk weight for some
securitization exposures and either the SSFA or Gross-Up Approach for other securitization
exposures. For example, Holding Company Z has three securitization exposures, each valued at
$100 on the balance sheet. Holding Company Z chooses to apply the 1,250 percent risk weight
to one exposure and use the Gross-Up Approach to calculate risk-weighted assets for the other
two exposures. Assume that the risk-weighted asset amount under the Gross-Up Approach is
$20 for each exposure.
The holding company would report the following:
(Column B)
(Column A) Adjustments to
Totals
Totals
Reported in
Column A

(Column Q)
Exposure
Amount
1250%

(Column T)
(Column U)
Total Risk-Weighted Asset
Amount by Calculation
Methodology
SSFA
Gross-Up

On-balance sheet
9.
securitization exposures
a.

Held-to-maturity
securities

BHCK

BHCK

BHCK

BHCK

BHCK

$300

$200

$100

$0

$40

9.a.

The $200 reported under column B reflects the balance sheet amounts of the two securitizations
risk-weighted using the Gross-Up Approach. This ensures that the sum of columns B and Q
continue to equal the amount reported in column A. The $40 under column U reflects the riskweighted asset amount of the sum of the two securitization exposures that were risk-weighted
using the Gross-Up Approach. This $40 is added to total risk-weighted assets in item 28 of
Schedule HC-R, Part II.
Holding Companies That Are Subject to the Market Risk Capital Rule

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The regulatory capital rules require all holding companies with significant market risk to
measure their market risk exposure and hold sufficient capital to mitigate this exposure. In
general, a holding company is subject to the market risk capital rule if its consolidated trading
activity, defined as the sum of trading assets and liabilities as reported in its FR Y9-C for the
previous quarter, equals: (1) 10 percent or more of the holding company’s total assets as
reported in its FR Y-9C for the previous quarter, or (2) $1 billion or more. However, the Federal
Reserve may exempt or include the holding company if necessary or appropriate for safe and
sound banking practices.
A holding company that is subject to the market risk capital rule must hold capital to support its
exposure to general market risk arising from fluctuations in interest rates, equity prices, foreign
exchange rates, and commodity prices and its exposure to specific risk associated with certain
debt and equity positions.
A covered position is a trading asset or trading liability (whether on- or off-balance sheet), as
reported on Schedule HC–D, that is held for any of the following reasons:
(1) For the purpose of short-term resale;
(2) With the intent of benefiting from actual or expected short-term price movements;
(3) To lock in arbitrage profits; or
(4) To hedge another covered position.
Covered positions include all positions in a holding company’s trading account and foreign
exchange and commodity positions, whether or not in the trading account. Covered positions
generally should not be risk-weighted as part of the holding company’s gross credit riskweighted assets. However, foreign exchange positions that are outside of the trading account and
all over-the-counter (OTC) derivatives as well as cleared transactions and unsettled transactions
continue to have a counterparty credit risk capital charge. Those positions are included in both
gross risk-weighted assets for credit risk and the holding company’s covered positions for market
risk.
Additionally, the trading asset or trading liability must be free of any restrictive covenants on its
tradability or the holding company must be able to hedge the material risk elements of the
trading asset or trading liability in a two-way market. A covered position also includes a foreign
exchange or commodity position, regardless of whether the position is a trading asset or trading
liability (excluding structural foreign currency positions if supervisory approval has been granted
to exclude such positions).
A covered position does not include:
(1) An intangible asset (including any servicing asset);
(2) A hedge of a trading position that is outside the scope of the holding company’s hedging
strategy (required by the market risk capital rule);
(3) Any position that, in form or substance, acts as a liquidity facility that provides support to
asset-backed commercial paper;
(4) A credit derivative recognized as a guarantee for risk-weighted asset calculation purposes
under the regulatory capital rules for credit risk;
(5) An equity position that is not publicly traded (other than a derivative that references a
publicly traded equity);
(6) A position held with the intent to securitize; or
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(7) A direct real estate holding.
A holding company subject to the market risk capital rule must maintain an overall minimum 8.0
percent ratio of total qualifying capital (the sum of Tier 1 capital and Tier 2 capital, net of all
deductions) to the sum of risk-weighted assets and market risk-weighted assets. Holding
companies should refer to the regulatory capital rules for specific instructions on the calculation
of the measure for market risk.
Balance Sheet Asset Categories
Treatment of Embedded Derivatives – If a holding company has a hybrid contract containing an
embedded derivative that must be separated from the host contract and accounted for as a
derivative instrument under ASC Topic 815, Derivatives and Hedging (formerly FASB Statement
No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended), then the
host contract and embedded derivative should be treated separately for risk-based capital purposes.
When the fair value of the embedded derivative has been reported as part of the holding company’s
assets on Schedule HC – Balance Sheet, that fair value (whether positive or negative) should be
reported (as a positive or negative number) in column B of the corresponding asset category item
in Schedule HC-R, Part II (items 1 to 11). The host contract, if an asset, should be risk weighted
according to the obligor or, if relevant, the guarantor or the nature of the collateral. All derivative
exposures should be risk-weighted in the derivative items of Schedule HC-R, Part II, as appropriate
(items 20 or 21).
Treatment of FDIC Loss-Sharing Agreements – Loss-sharing agreements entered into by the
FDIC with acquirers of assets from failed institutions are considered conditional guarantees for
risk-based capital purposes due to contractual conditions that acquirers must meet. The
guaranteed portion of assets subject to a loss-sharing agreement may be assigned a 20 percent
risk weight. Because the structural arrangements for these agreements vary depending on the
specific terms of each agreement, holding companies should consult with their Federal Reserve
Bank to determine the appropriate risk-based capital treatment for specific loss-sharing
agreements.
Allocated Transfer Risk Reserve (ATRR) – If the reporting holding company is required to
establish and maintain an ATRR as specified in Section 905(a) of the International Lending
Supervision Act of 1983, the ATRR should be reported in Schedule HC-R, Part II, item 30. The
ATRR is not eligible for inclusion in either tier 1 or tier 2 capital.
Any ATRR related to loans and leases held for investment is included on the balance sheet in
Schedule HC, item 4(c), "Allowance for loan and lease losses," and separately disclosed in
Schedule HI-B, part II, Memorandum item 1. However, if the holding company must maintain
an ATRR for any asset other than a loan or lease held for investment, the balance sheet category
for that asset should be reported net of the ATRR on Schedule HC. In this situation, the ATRR
should be reported as a negative number (i.e., with a minus (-) sign) in column B, "Adjustments
to totals reported in Column A," of the corresponding asset category in Schedule HC-R, Part II,
items 1 through 4 and 7 through 9. The amount to be risk-weighted for this asset in columns C
through Q, as appropriate, would be its net carrying value plus the ATRR. For example, a
holding company has a held-to-maturity security issued by a foreign commercial company
against which it has established an ATRR of $20. The security, net of the ATRR, is included in
Schedule HC, item 2(a), "Held-to-maturity securities," at $80. The security should be included

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in Schedule HC-R, Part II, item 2(a), column A, at $80. The holding company should include $20 in Schedule HC-R, Part II, item 2(a), column B, and $100 in item 2(a), column I.

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Item Instructions for Part II
Balance Sheet Asset Categories
Item No. Caption and Instructions
1

Cash and balances due from depository institutions. Report in column A the
amount of cash and balances due from depository institutions reported in Schedule
HC, sum of items 1(a) and 1(b), excluding those balances due from depository
institutions that qualify as securitization exposures as defined in §.2 of the regulatory
capital rules.
The amount of those balances due from depository institutions reported in Schedule
HC, items 1(a) and 1(b) that qualify as securitization exposures must be reported in
Schedule HC-R, Part II, item 9(d), column A.


In column C–0% risk weight, include:
o The amount of currency and coin reported in Schedule HC, item 1(a);
o Any balances due from Federal Reserve Banks reported in Schedule HC, item
1(b); and
o The insured portions of deposits in FDIC-insured depository institutions and
NCUA-insured credit unions reported in Schedule HC, items 1(a) and 1(b).



In column G–20% risk weight, include:
o Any balances due from depository institutions and credit unions that are
organized under the laws of the United States or a U.S. state reported in
Schedule HC, items 1(a) and 1(b), in excess of any applicable FDIC or NCUA
deposit insurance limits for deposit exposures or where the depository
institutions are not insured by either the FDIC or the NCUA;
o Any balances due from Federal Home Loan Banks reported in Schedule HC,
items 1(a) and 1(b); and
o The amount of cash items in the process of collection reported in Schedule
HC, item 1(a).



In column I –100% risk weight, include all other amounts that are not reported in
columns C through Q.



Cash and balances due from depository institutions that must be risk-weighted
according to the Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The amounts reported in Schedule HC, items 1(a) and 1(b), composed of
balances due from foreign banks;
o Any balances due from foreign central banks.

If the reporting holding company is the correspondent holding company in a passthrough reserve balance relationship, report in column C the amount of its own

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reserves as well as those reserve balances actually passed through to a Federal
Reserve Bank on behalf of its respondent depository institutions.
1

If the reporting holding company is the respondent holding company in a passthrough reserve balance relationship, report in column C the amount of the holding
company’s reserve balances due from its correspondent holding company or bank that
its correspondent has actually passed through to a Federal Reserve Bank on the
reporting holding company’s behalf, i.e., for purposes of this item, treat these
balances as balances due from a Federal Reserve Bank. This treatment differs from
that required in Schedule HC-A, item 2, "Balances due from depository institutions in
the U.S.," which treats pass-through reserve balances held by a bank's correspondent
as balances due from a depository institution as opposed to balances due from the
Federal Reserve.
If the reporting holding company is a participant in an excess balance account at a
Federal Reserve Bank, report in column C the holding company’s balance in this
account.
If the reporting holding company accounts for any holdings of certificates of deposit
(CDs) like available-for-sale debt securities that do not qualify as securitization
exposures, report in column A the fair value of such CDs. If the holding company has
made the Accumulated Other Comprehensive Income opt out election in Schedule
HC-R, Part I, item 3(a), include in column B the difference between the fair value and
amortized cost of these CDs. When fair value exceeds amortized cost, report the
difference as a positive number in column B. When amortized cost exceeds fair value,
report the difference as a negative number (i.e., with a minus (-) sign) in column B.
Risk weight the amortized cost of these CDs in columns C through J, as appropriate.

2

Securities (excluding securitization exposures). Do not include securities that
qualify as securitization exposures in items 2(a) and 2(b) below; instead, report these
securities in Schedule HC-R, Part II, items 9(a) and 9(b). In general, under the
regulatory capital rules, securitizations are exposures that are “tranched” for credit
risk. Refer to the definitions of securitization, traditional securitization, synthetic
securitization and tranche in §.2 of the regulatory capital rules.

2(a)

Held-to-maturity securities. Report in column A the amount of held-to-maturity
(HTM) securities reported in Schedule HC, item 2(a), excluding those HTM
securities that qualify as securitization exposures as defined in §.2 of the regulatory
capital rules.
The amount of those HTM securities reported in Schedule HC, item 2(a), that qualify
as securitization exposures are to be reported in Schedule HC-R, Part II, item 9(a),
column A. The sum of Schedule HC-R, Part II, items 2(a) and 9(a), column A, must
equal Schedule HC, item 2(a).
Exposure amount to be used for purposes of risk weighting – holding company
cannot or has not made the Accumulated Other Comprehensive Income (AOCI) optout election in Schedule HC-R, Part I, item 3(a):
For a security classified as held-to-maturity where the holding company cannot or has
not made the AOCI opt-out election (i.e., most AOCI is included in regulatory
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capital), the exposure amount to be risk weighted by the holding company is the
carrying value of the security, which is the value of the asset reported (a) on the
balance sheet of the holding company determined in accordance with GAAP and (b)
in Schedule HC-R, Part II, item 2(a), column A.
Exposure amount to be used for purposes of risk weighting – holding company has
made the AOCI opt-out election in Schedule HC-R, Part I, item 3(a):
For a security classified as held-to-maturity where the holding company has made the
AOCI opt-out election (i.e., most AOCI is not included in regulatory capital), the
exposure amount to be risk weighted by the holding company is the carrying value of
the security reported (a) on the balance sheet of the holding company and (b) in
Schedule HC-R, Part II, item 2(a), column A, less any net unrealized gain on the
exposure plus any net unrealized loss on the exposure included in AOCI. For
purposes of determining the exposure amount of an HTM security, an unrealized gain
(loss), if any, on such a security that is included in AOCI is (i) the unamortized
balance of the unrealized gain (loss) that existed at the date of transfer of a debt
security transferred into the held-to-maturity category from the available for sale
category, or (ii) the unaccreted portion of other-than-temporary impairment losses on
an HTM debt security that was not recognized in earnings in accordance with ASC
Topic 320, Investments-Debt and Equity Securities (formerly FASB Statement No.
115, “Accounting for Certain Investments in Debt and Equity Securities”). Thus, for
an HTM security with such an unrealized gain (loss), report in column B any
difference between the carrying value of the security reported in column A of this
item and its exposure amount reported under the appropriate risk weighting column
C through J.


In column C–0% risk weight. The zero percent risk weight applies to exposures to
the U.S. government, a U.S. government agency, or a Federal Reserve Bank, and
those exposures otherwise unconditionally guaranteed by the U.S. government.
Include exposures to or unconditionally guaranteed by the FDIC or the NCUA.
Certain foreign government exposures and certain entities listed in §.32 of the
regulatory capital rules may also qualify for the zero percent risk weight. Include
the exposure amounts of securities reported in Schedule HC-B, column A, that do
not qualify as securitization exposures that qualify for the zero percent risk
weight. Such securities may include portions of, but may not be limited to:
o Item 1, "U.S. Treasury securities,"
o Item 2(a), Securities "Issued by U.S. Government agencies,"
o Item 4(a)(1), Residential mortgage pass-through securities "Guaranteed by
GNMA,”
o Item 4(b)(1), those other residential mortgage-backed securities issued or
guaranteed by U.S. Government agencies, such as GNMA exposures,
o Item 4(c)(1)(a), those commercial MBS “Issued or guaranteed by FNMA,
FHLMC, or GNMA” that represent GNMA securities, and
o Item 4(c)(2)(a), those commercial mortgage-backed securities (MBS) “Issued
or guaranteed by U.S. Government agencies or sponsored agencies” that
represent GNMA securities.
o The portion of any exposure reported in Schedule HC, item 2(a), that is
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight.

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

In column G–20% risk weight. The 20 percent risk weight applies to general
obligations of U.S. states, municipalities, and U.S. public sector entities. It also
applies to exposures to U.S. depository institutions and credit unions, exposures
conditionally guaranteed by the U.S. government, as well as exposures to U.S.
government-sponsored enterprises. Certain foreign government and foreign bank
exposures may qualify as indicated in §.32 of the regulatory capital rules. Include
the exposure amounts of securities reported in Schedule HC-B, Column A, that do
not qualify as securitization exposures that qualify for the 20 percent risk weight.
Such securities may include portions of, but may not be limited to:
o Item 2(b), Securities "Issued by U.S. Government-sponsored agencies,”
o Item 3, "Securities issued by states and political subdivisions in the U.S." that
represent general obligation securities,
o Item 4(a)(2), Residential mortgage pass-through securities "Issued by FNMA
and FHLMC,"
o Item 4(b)(1), Other residential mortgage-backed securities "Issued or
guaranteed by U.S. Government agencies or sponsored agencies,"
o Item 4(c)(1)(a), those commercial MBS “Issued or guaranteed by FNMA,
FHLMC, or GNMA” that represent FHLMC and FNMA securities,
o Item 4(c)(2)(a), those commercial MBS “Issued or guaranteed by U.S.
Government agencies or sponsored agencies” that represent FHLMC and
FNMA securities,
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
agencies", and
o Any securities categorized as “structured financial products” on Schedule HCB that are not securitization exposures and qualify for the 20 percent risk
weight. Note: Many of the structured financial products would be considered
securitization exposures and must be reported in Schedule HC-R, Part II, item
9(a) for purposes of calculating risk weighted assets.
o The portion of any exposure reported in Schedule HC, item 2(a), that is
secured by collateral or has a guarantee that qualifies for the 20 percent risk
weight.



In column H–50% risk weight, include the exposure amounts of securities
reported in Schedule HC-B, column A, that do not qualify as securitization
exposures that qualify for the 50 percent risk weight. Such securities may include
portions of, but may not be limited to:
o Item 3, "Securities issued by states and political subdivisions in the U.S.," that
represent revenue obligation securities,
o Item 4(a)(3), "Other [residential mortgage] pass-through securities," that
represent residential mortgage exposures that qualify for 50 percent risk
weight. (Pass-through securities that do not qualify for 50 percent risk weight
should be assigned to the 100 percent risk weight category.)
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
agencies" (excluding portions subject to an FDIC loss-sharing agreement and
interest-only securities) that represent residential mortgage exposures that
qualify for 50 percent risk weight, and

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o Item 4(b)(3), “All other residential MBS.” Include only those MBS that
qualify for 50 percent risk weight. Refer to §.32(g), (h) and (i) of the
regulatory capital rules. Note: do not include MBS portions that are tranched
for credit risk; those must be reported as securitization exposures in Schedule
HC-R, Part II, item 9(a). Exclude interest-only securities.
o The portion of any exposure reported in Schedule HC, item 2(a), that is
secured by collateral or has a guarantee that qualifies for the 50 percent risk
weight.


In column I–100% risk weight, include the exposure amounts of securities
reported in Schedule HC-B, column A, that do not qualify as securitization
exposures that qualify for the 100 percent risk weight. Such securities may
include portions of, but may not be limited to:,
o Item 4(a)(3), "Other [residential mortgage] pass-through securities," that
represent residential mortgage exposures that qualify for the 100 percent risk
weight,
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
agencies" (excludes portions subject to an FDIC loss-sharing agreement), that
represent residential mortgage exposures that qualify for the 100 percent risk
weight,
o Item 4(b)(3), "All other residential MBS." Include only those MBS that
qualify for the 100 percent risk weight. Refer to §.32(g), (h) and (i) of the
regulatory capital rules. (Note: do not include MBS that are tranched for credit
risk; those should be reported as securitization exposures in Schedule HC-R,
Part II, item 9(a)),
o Item 4(c)(1)(b), “Other [commercial mortgage] pass-through securities,”
o Item 4(c)(2)(b), “All other commercial MBS,”
o Item 5(a), "Asset-backed securities," and
o Any securities reported as “structured financial products” in Schedule HC-B,
item 5(b), that are not securitization exposures and qualify for the 100 percent
risk weight. Note: Many of the structured financial products would be
considered securitization exposures and must be reported in Schedule HC-R,
Part II, item 9(a), for purposes of calculating risk weighted assets.
o Also include all other HTM securities that do not qualify as securitization
exposures reported in Schedule HC, item 2(a), that are not included in
columns C through through J.
o The portion of any exposure reported in Schedule HC, item 2(a), that is
secured by collateral or has a guarantee that qualifies for the 100 percent risk
weight.



In column J–150% risk weight, include the exposure amounts of securities
reported in Schedule HC-B, column A, that are past due 90 days or more or in
nonaccrual status (except sovereign exposures), excluding those portions that are
covered by qualifying collateral or eligible guarantees as described in §.37 and
§.36, respectively, of the regulatory capital rules.

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

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Held-to-maturity securities that must be risk-weighted according to the Country
Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include the exposure amounts
of those securities reported in Schedule HC-B, column A, that are directly and
unconditionally guaranteed by foreign central governments or are exposures
to foreign banks that do not qualify as securitization exposures. Such
securities may include portions of, but may not be limited to:
o Item 4(a)(3), "Other [residential mortgage] pass-through securities,"
o Item 4(b)(3), "All other residential MBS,"
o Item 4(c)(1)(b), “Other [commercial mortgage] pass-through securities,”
o Item 4(c)(2)(b), “All other commercial MBS,”
o Item 5(a), "Asset-backed securities,"
o Any securities reported as “structured financial products” in Schedule HC-B,
item 5(b), that are not securitization exposures. Note: Many of the structured
financial products would be considered securitization exposures and reported
in Schedule HC-R, Part II, item 9(a) for purposes of calculating risk weighted
assets, and
o item 6(b), “Other foreign debt securities.”

Available-for-sale securities. Report in column A the fair value of available-for-sale
(AFS) securities reported in Schedule HC, item 2(b), excluding those AFS securities that
qualify as securitization exposures as defined in §.2 of the regulatory capital rules. The
fair value of those AFS securities reported in Schedule HC, item 2(b), that qualify as
securitization exposures must be reported in Schedule HC-R, Part II, item 9(b), column
A. The sum of Schedule HC-R, Part II, items 2(b) and 9(b), column A, must equal
Schedule HC, item 2(b).
Exposure amounts to be used for purposes of risk weighting by a holding company that
cannot or has not made the Accumulated Other Comprehensive Income (AOCI) opt-out
election in Schedule HC-R, Part I, item 3(a):
For a security classified as available-for-sale where the holding company cannot or has
not made the AOCI opt-out election (i.e., most AOCI is included in regulatory capital),
the exposure amount to be risk-weighted by holding company is:
 For debt securities: the carrying value, which is the value of the asset reported on
the balance sheet of the holding company determined in accordance with GAAP (i.e.,
the fair value of the available-for-sale debt security) and in column A.
 For equity securities and preferred stock classified as an equity under GAAP:
the adjusted carrying value.13

13

Adjusted carrying value applies only to equity exposures and is defined in §.51 of the regulatory capital rules. In
general, it includes an on-balance sheet amount as well as application of conversion factors to determine on-balance
sheet equivalents of any off-balance sheet commitments to acquire equity exposures. For holding companies that
cannot or have not made the AOCI opt-out election, the on-balance sheet component is equal to the carrying value.
For holding companies that have made the AOCI opt-out election, the on-balance sheet component is the carrying
value less any net unrealized gains that are reflected in the carrying value but excluded from regulatory capital.
Refer to §.51 for the precise definition.
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Exposure amounts to be used for purposes of risk weighting by a holding company that
has made the AOCI opt-out election in Schedule HC-R, Part I, item 3(a):
For a security classified as available-for-sale where the holding company has made the
AOCI opt-out election (i.e., most AOCI is not included in regulatory capital), the
exposure amount to be risk weighted by the holding company is:
 For debt securities: the carrying value, less any net unrealized gains on the exposure
plus any net realized loss on the exposure included in AOCI.
 For equity securities and preferred stock classified as an equity under GAAP:
the carrying value less any net unrealized gains that are reflected in such carrying
value but are excluded from the holding company’s regulatory capital components.


In column B, a holding company that has made the AOCI opt-out election should
include the difference between the fair value and amortized cost of those AFS
debt securities that do not qualify as securitization exposures. This difference
equals the amounts reported in Schedule HC-B, items 1 through 6, column D,
minus items 1 through 6, column C, for those AFS debt securities included in
these items that are not securitization exposures.
o When fair value exceeds cost, report the difference as a positive number in
Schedule HC-R, Part II, item 2(b), column B.
o When cost exceeds fair value, report the difference as a negative number (i.e.,
with a minus (-) sign) in Schedule HC-R, Part II, item 2(b), column B.
o If AFS equity securities with readily determinable fair values have a net
unrealized gain (i.e., Schedule HC-B, item 7, column D, exceeds item 7,
column C), the portion of the net unrealized gain (55 percent or more) not
included in Tier 2 capital should be included in Schedule HC-R, Part II, item
2(b), column B. The portion that is not included in Tier 2 capital equals
Schedule HC-B, item 7, column D minus column C, minus Schedule HC-R,
Part I, item 31.
Example: A holding company reports an AFS debt security that is a not a
securitization exposure on its balance sheet in Schedule HC, item 2(b), at a
carrying value (i.e., fair value) of $105. The amortized cost of the debt security is
$100. The holding company has made the AOCI opt-out election in Schedule
HC-R, Part I, item 3(a). The AFS debt security has a $5 unrealized gain that is
included in AOCI. In Schedule HC-R, Part II, item 2(b), the holding company
would report:
o $105 in column A. This is the carrying value of the AFS debt security on the
bank’s balance sheet.
o $5 in column B. This is the difference between the carrying value (i.e., fair
value) of the debt security and its exposure amount that is subject to riskweighting. For holding companies that has made the AOCI opt-out election,
column B will typically represent the amount of the unrealized gain or
unrealized loss on the security. Gains are reported as positive numbers; losses
as negative numbers. (Note: if the holding company has not made or cannot
make the AOCI opt-out election, there will not be an adjustment to be
reported in column B.)
o $100 is the exposure amount subject to risk weighting. This amount will be
reported under the appropriate risk weight associated with the exposure
(columns C through J). For holding companies that have make the AOCI opt29

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out election, the exposure amount typically will be the carrying value (i.e., fair
value) of the debt security excluding any unrealized gain or loss.


In column C–0% risk weight, the zero percent risk weight applies to exposures to
the U.S. government, a U.S. government agency, or a Federal Reserve Bank, and
those exposures otherwise unconditionally guaranteed by the U.S. government.
Include exposures to or unconditionally guaranteed by the FDIC or the NCUA.
Certain foreign government exposures and certain entities listed in §.32 of the
regulatory capital rules may also qualify for zero percent risk weight. Include the
exposure amounts of securities reported in Schedule HC-B, column C, that do not
qualify as securitization exposures that qualify for the zero percent risk weight.
Such securities may include portions of, but may not be limited to:
o Item 1, "U.S. Treasury securities,"
o Item 2(a), Securities "Issued by U.S. Government agencies,"
o Item 4(a)(1), Residential mortgage pass-through securities "Guaranteed by
GNMA,”
o Portions of item 4(b)(1), Other residential mortgage-backed securities "Issued
or guaranteed by U.S. Government agencies or sponsored agencies," such as
GNMA exposures,
o Item 4(c)(1)(a) , certain portions of commercial MBS “Issued or guaranteed
by FNMA, FHLMC, or GNMA” that represent GNMA securities, and
o Item 4(c)(2)(a), certain portions of commercial MBS “Issued or guaranteed by
U.S. Government agencies or sponsored agencies” that represent GNMA
securities.
o The portion of any exposure reported in Schedule HC, item 2(b), that is
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight.

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

In column G–20% risk weight, the 20 percent risk weight applies to general
obligations of U.S. states, municipalities, and U.S. public sector entities. It also
applies to exposures to U.S. depository institutions and credit unions, exposures
conditionally guaranteed by the U.S. government, as well as exposures to U.S.
government sponsored enterprises. Certain foreign government and foreign bank
exposures may qualify for the 20 percent risk weight as indicated in §.32 of the
regulatory capital rules. Include the exposure amounts of those securities reported
in Schedule HC-B, Column C, that do not qualify as securitization exposures that
qualify for the 20 percent risk weight. Such securities may include portions of, but
may not be limited to:
o Item 2(b), Securities "Issued by U.S. Government-sponsored agencies”
(exclude interest-only securities),
o Item 3, "Securities issued by states and political subdivisions in the U.S." that
represent general obligation securities,
o Item 4(a)(2), Residential mortgage pass-through securities "Issued by FNMA
and FHLMC" (exclude interest-only securities),
o Item 4(b)(1), Other residential mortgage-backed securities "Issued or
guaranteed by U.S. Government agencies or sponsored agencies" (exclude
interest-only securities),
o Item 4(c)(1)(a), those commercial MBS “Issued or guaranteed by FNMA,
FHLMC, or GNMA” that represent FHLMC and FNMA securities (exclude
interest-only securities),
o Item 4(c)(2)(a), those commercial MBS “Issued or guaranteed by U.S.
Government agencies or sponsored agencies” that represent FHLMC and
FNMA securities (exclude interest-only securities),
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
agencies"(exclude interest-only securities), and
o Any securities categorized as “structured financial products” on Schedule HCB that are not securitization exposures and qualify for the 20 percent risk
weight. Note: Many of the structured financial products would be considered
securitization exposures and must be reported in Schedule HC-R, Part II, item
9(b), for purposes of calculating risk-weighted assets. Exclude interest-only
securities.
o The portion of any exposure reported in Schedule HC, item 2(b), that is
secured by collateral or has a guarantee that qualifies for the 20 percent risk
weight.



In column H–50% risk weight, include the exposure amounts of those securities
reported in Schedule HC-B, column C, that do not qualify as securitization
exposures that qualify for the 50 percent risk weight. Such securities may include
portions of, but may not be limited to:
o Item 3, "Securities issued by states and political subdivisions in the U.S.," that
represent revenue obligation securities,
o Item 4(a)(3), "Other [residential mortgage] pass-through securities," that
represent residential mortgage exposures that qualify for the 50 percent risk
weight. (Pass-through securities that do not qualify for the 50 percent risk
weight should be assigned to the 100 percent risk weight category.)
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
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agencies" (exclude portions subject to an FDIC loss-sharing agreement and
interest-only securities) that represent residential mortgage exposures that
qualify for the 50 percent risk weight, and
o Item 4(b)(3), “All other residential MBS.” Include only those MBS that
qualify for the 50 percent risk weight. Refer to §.32(g), (h) and (i) of the
regulatory capital rules. Note: do not include MBS that are tranched for credit
risk; those should be reported as securitization exposures in Schedule HC-R,
Part II, item 9(b). Do not include interest-only securities.
o The portion of any exposure reported in Schedule HC, item 2(b), that is
secured by collateral or has a guarantee that qualifies for the 50 percent risk
weight.


In column I–100% risk weight, include the exposure amounts of securities
reported in Schedule HC-B, column C, that do not qualify as securitization
exposures that qualify for the 100 percent risk weight. Such securities may
include portions of, but may not be limited to:
o Item 4(a)(3), "Other [residential mortgage] pass-through securities," that
represent residential mortgage exposures that qualify for the 100 percent risk
weight,
o Item 4(b)(2), Other residential mortgage-backed securities "Collateralized by
MBS issued or guaranteed by U.S. Government agencies or sponsored
agencies" (excluding portions subject to an FDIC loss-sharing agreement) that
represent residential mortgage exposures that qualify for the 100 percent risk
weight,
o Item 4(b)(3), "All other residential MBS." Include only those MBS that
qualify for the 100 percent risk weight. Refer to §.32(g), (h) and (i) of the
regulatory capital rules. Note: do not include MBS portions that are tranched
for credit risk; those should be reported as securitization exposures in
Schedule HC-R, Part II, item 9(b).
o Item 4(c)(1)(b), “Other [commercial mortgage] pass-through securities,”
o Item 4(c)(2)(b), “All other commercial MBS,”
o Item 5(a), "Asset-backed securities,"
o Any securities reported as “structured financial products” in Schedule HC-B,
item 5(b), that are not securitization exposures and qualify for the 100 percent
risk weight. Note: Many of the structured financial products would be
considered securitization exposures and must be reported in Schedule HC-R,
Part II, item 9(b) for purposes of calculating risk weighted assets.
o The portion of any exposure reported in Schedule HC, item 2(b), that is
secured by collateral or has a guarantee that qualifies for the 100 percent risk
weight.
o Publicly traded AFS equity exposures and AFS equity exposures to
investment funds (including mutual funds), to the extent that the aggregate
carrying value of the holding company’s equity exposures does not exceed 10
percent of total capital. If the holding company’s aggregate carrying value of
equity exposures is greater than 10 percent of total capital, the holding
company must report the exposure amount of its AFS equity exposures to
investments funds (including mutual funds) in column R (and the riskweighted asset amount of such AFS equity exposures in column S) and the
exposure amount of its other AFS equity exposures in either columns L or N,
as appropriate.
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o Also include all other AFS securities that do not qualify as securitization
exposures reported in Schedule HC, item 2(b), that are not included in
columns C through H, J through N, or R.


In column J–150% risk weight, include the exposure amounts of securities
reported in Schedule HC-B, column C, that are past due 90 days or more or in
nonaccrual status (except sovereign exposures), excluding those portions that are
covered by qualifying collateral or eligible guarantees as described in §.37 and
§.36, respectively, of the regulatory capital rules.



In column K–250% risk weight, include the portion that does not qualify as a
securitization exposure of Schedule HC, item 2(b), that represents the adjusted
carrying value of exposures that are significant investments in the common stock
of unconsolidated financial institutions that are not deducted from capital. For
further information on the treatment of equity exposures, refer to §.51 to §.53 of
regulatory capital rules. This risk weight takes effect in 2018, and therefore this
item is blocked from being completed until that time. Before 2018, report such
significant investments in the 100 percent risk weight category.



In column L–300% risk weight, for publicly traded AFS equity securities with
readily determinable fair values reported in Schedule HC-B, item 7, include the
fair value of these equity securities (as reported in Schedule HC-B, item 7,
column D) if they have a net unrealized loss. If these equity securities have a net
unrealized gain, include their adjusted carrying value (as reported in Schedule
HC-B, item 7, column C) plus the portion of the unrealized gain (up to 45
percent) included in tier 2 capital (as reported in Schedule HC-R, Part I, item 31).



In column N–600% risk weight, for AFS equity securities to investment firms
with readily determinable fair values reported in Schedule HC-B, item 7, include
the fair value of these equity securities (as reported in Schedule HC-B, item 7,
column D) if they have a net unrealized loss. If these equity securities have a net
unrealized gain, include their adjusted carrying value (as reported in Schedule
HC-B, item 7, column C) plus the portion of the unrealized gain (up to 45
percent) included in tier 2 capital (as reported in Schedule HC-R, Part I, item 31).



In columns R and S—Application of Other Risk-Weighting Approaches, include
the holding company’s AFS equity exposures to investment funds (including
mutual funds) if the aggregate carrying value of the holding company’s equity
exposures is greater than 10 percent of total capital. Report in column R the
exposure amount of these equity exposures to investment funds. Report in
column S the risk-weighted asset amount of these equity exposures to investment
funds as measured under the full look-through approach, the simple modified
look-through approach, or the alternative modified look-through approach as
described in §.53 of the regulatory capital rules. All three of these approaches
require a minimum risk weight of 20 percent. For further information, refer to the
discussion of “Treatment of Equity Exposures” in the General Instructions for
Schedule RC-R, Part II.

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Available-for-sale securities that must be risk-weighted according to the Country
Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include the exposure amounts
of those securities reported in Schedule HC-B, Column C, that are directly and
unconditionally guaranteed by foreign central governments or are exposures
on foreign banks that do not qualify as securitization exposures. Such
securities may include portions of, but may not be limited to:
o Item 4(a)(3), "Other [residential mortgage] pass-through securities,"
o Item 4(b)(3), "All other residential MBS,"
o Item 4(c)(1)(b), “Other [commercial mortgage] pass-through securities,”
o Item 4(c)(2)(b), “All other commercial MBS,”
o Item 5(a), "Asset-backed securities,"
o Any securities reported as “structured financial products” in Schedule HC-B,
item 5(b), that are not securitization exposures. Note: Many structured
financial products would be considered securitization exposures and must be
reported in Schedule HC-R, Part II, item 9(b) for purposes of calculating risk
weighted assets,
o Item 6(b), “Other foreign debt securities,” and
o Item 7, “Investments in mutual funds and other equity securities with readily
determinable fair values.”

3

Federal funds sold and securities purchased under agreements to resell.

3(a)

Federal funds sold (in domestic offices). Report in column A the amount of federal
funds sold reported in Schedule HC, item 3(a), excluding those federal funds sold that
qualify as securitization exposures as defined in §.2 of the regulatory capital rules.
The amount of those federal funds sold reported in Schedule HC, item 3(a), that
qualify as securitization exposures are to be reported in Schedule HC-R, Part II, item
9(d), column A.


In column C – 0% risk weight, include the portion of Schedule HC, item 3(a), that
is directly and unconditionally guaranteed by U.S. Government agencies. Also
include the portion of any exposure reported in Schedule HC, item 3(a), that is
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight.



In column G – 20% risk weight, include exposures to U.S. depository institution
counterparties. Also include the portion of any exposure reported in Schedule
HC, item 3(a), that is secured by collateral or has a guarantee that qualifies for the
20 percent risk weight.



In column H – 50% risk weight, include exposures reported in Schedule HC, item
3(a), that is secured by collateral or has a guarantee that qualifies for the 50
percent risk weight.

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

In column I – 100% risk weight, include exposures to non-depository institution
counterparties that lack qualifying collateral (refer to the regulatory capital rules
for specific criteria). Also include the amount of federal funds sold reported in
Schedule HC, item 3(a), that are not included in columns C through J. Also
include the portion of any exposure reported in Schedule HC, item 3(a), that is
secured by collateral or has a guarantee that qualifies for the 100 percent risk
weight.



Federal funds sold that must be risk-weighted according to the Country Risk
Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The portion of Schedule HC, item 3(a), that is directly and unconditionally
guaranteed by foreign central governments and exposures to foreign banks.

Securities purchased under agreements to resell. Report in columns A and B the
amount of securities purchased under agreements to resell (securities resale
agreements, i.e. reverse repos) reported in Schedule HC, item 3(b), excluding those
securities resale agreements that qualify as securitization exposures as defined in §.2
of the regulatory capital rules. The amount of those securities resale agreements
reported in Schedule HC, item 3(b), that qualify as securitization exposures are to be
reported in Schedule HC-R, Part II, item 9(d), column A.


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Note: for purposes of risk weighting, please distribute on-balance sheet securities
purchased under agreements to resell reported in Schedule HC, item 3(b), within
the risk weight categories in Schedule HC-R, Part II, item 16, “Repo-style
transactions.” Holding companies should report their securities purchased under
agreements to resell in item 16 in order for institutions to calculate their exposure,
and thus risk-weighted assets, based on master netting set agreements covering
repo-style transactions.

Loans and leases held for sale. Report in column A of the appropriate subitem the
carrying value of loans and leases held for sale (HFS) reported in Schedule HC, item
4(a), excluding those HFS loans and leases that qualify as securitization exposures as
defined in §.2 of the regulatory capital rules.
The carrying value of those HFS loans and leases reported in Schedule HC, item 4(a),
that qualify as securitization exposures must be reported in Schedule HC-R, Part II,
item 9(d), column A.
The sum of Schedule HC-R, Part II, items 4(a) through 4(d), column A, plus the
carrying value of HFS loans and leases that qualify as securitization exposures and
are reported in Schedule HC-R, Part II, item 9(d), column A, must equal Schedule
HC, item 4(a).

4(a)

Residential mortgage exposures. Report in column A the carrying value of loans
and leases held for sale (HFS) reported in Schedule HC, item 4(a), that meet the
definition of a residential mortgage exposure or a statutory multifamily mortgage in
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§.2 of the regulatory capital rule. Include in this item the carrying value of HFS loans
secured by multifamily residential properties with an original and outstanding amount
of $1 million or less that are reported in Schedule HC-C, Part I, item 1(d), as they
would meet the regulatory capital rules’ definition of residential mortgage exposure.
Exclude HFS loans secured by multifamily residential properties included in
Schedule HC-C, item 1(d), that do not meet the definition of a residential mortgage
exposure or a statutory multifamily mortgage. Also exclude HFS 1-4 family
residential construction loans reported in Schedule HC-C, Part I, item 1.a.(1). Such
loans should be reported in Schedule HC-R, Part II, item 4(c) or 4(d), as appropriate.


In column C–0% risk weight, include the portion of any exposure that meets the
definition of residential mortgage exposure or statutory multifamily mortgage
reported in Schedule HC, item 4(a), that is secured by collateral or has a guarantee
that qualifies for the zero percent risk weight. This would include loans
collateralized by deposits at the reporting institution.

•

In column G–20% risk weight, include the carrying value of the guaranteed
portion of HFS Federal Housing Administration (FHA) and Veterans
Administration (VA) mortgage loans included in Schedule HC-C, item 1(c)(2)(a).
Also include the portion of any exposure that meets the definition of residential
mortgage exposure or statutory multifamily mortgage reported in Schedule HC,
item 4(a), that is secured by collateral or has a guarantee that qualifies for the 20
percent risk weight. This would include the portion of such an exposure covered
by an FDIC loss-sharing agreement.



In column H–50% risk weight, include the carrying value of HFS loans secured by
(a) 1-4 family residential properties and by (b) multifamily residential properties
with an original and outstanding amount of $1 million or less included in
Schedule HC-C, item 1(c)(1) (only include qualifying first mortgage loans),
qualifying loans from items 1(c)(2)(a) and 1(d), or those that meet the definition
of a residential mortgage exposure and qualify for 50 percent risk weight under
§.32(g) of the regulatory capital rules. For 1-4 family residential mortgages, the
loans must be prudently underwritten, be fully secured by first liens on 1-4 family
or multifamily residential properties, not 90 days or more past due or in
nonaccrual status, and have not been restructured or modified (unless modified or
restructured solely pursuant to the U.S. Treasury’s Home Affordable Mortgage
Program (HAMP)). Also include loans that meet the definition of statutory
multifamily mortgage in §.2 of the regulatory capital rules. Also include the
portion of any exposure that meets the definition of residential mortgage
exposure or statutory multifamily mortgage reported in Schedule RH, item 4(a),
that is secured by collateral or has a guarantee that qualifies for the 50 percent risk
weight.
Notes:
 Refer to the definition of residential mortgage exposure in §.2 of the
regulatory capital rules, and refer to the requirements for risk weighting
residential mortgage loans in §.32 of the regulatory capital rules.
 A residential mortgage loan may receive a 50 percent risk weight if it meets
the qualifying criteria in §.32(g) of the regulatory capital rules:
o A property is owner-occupied or rented;
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o The loan is prudently underwritten including the loan amount as a
percentage of the appraised value of the real estate collateral;
o The loan is not 90 days or more past due or on nonaccrual;
o The loan is not restructured or modified (except for loans restructured
solely pursuant to the U.S. Treasury’s HAMP).
o If the holding company holds the first-lien and junior –lien(s) on a
residential mortgage exposure, and no other party holds an intervening
lien, the holding company must combine the exposures and treat them as a
single first-lien residential mortgage exposure.
A first lien home equity line (HELOC) may qualify for 50 percent risk weight
if it meets the qualifying criteria.
A residential mortgage loan of $1 million or less on a property of more than 4
units may qualify for 50 percent risk weight if it meets the qualifying criteria.



In column I–100% risk weight, include the carrying value of HFS loans that are
residential mortgage exposures reported in Schedule HC, item 4(a), that are not
included in columns C, G, H or R. Also include the portion of any exposure that
meets the definition of residential mortgage exposure reported in Schedule HC,
item 4(a), that is secured by collateral or has a guarantee that qualifies for the 100
percent risk weight.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any HFS exposure reported in Schedule HC, item 4(a) that meets the
definition of residential mortgage exposure or statutory multifamily mortgage and
is secured by qualifying financial collateral that meets the definition of a
securitization exposure in §.2 of the regulatory capital rules or is a mutual fund
only if the holding company chooses to recognize the risk-mitigating effects of
the securitization exposure or mutual fund collateral under the simple approach
outlined in §.37 of the regulatory capital rules. Under the simple approach, the
risk weight assigned to the collateralized portion of the exposure may not be less
than 20 percent.
o Include in column R the carrying value of the portion of an HFS exposure that
is secured by the fair value of securitization exposure or mutual fund collateral
that meets the general requirements of the simple approach in §.37. In
addition, the holding company must apply the same approach to securitization
exposure collateral – either the Simplified Supervisory Formula Approach or
the Gross-Up Approach – that it applies to determine the risk-weighted asset
amounts of its on- and off-balance sheet securitization exposures that are
reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the HFS
exposure secured by such collateral. Any remaining portion of the HFS
exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through I, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.

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High volatility commercial real estate exposures. Report in column A the carrying
value of loans held for sale (HFS) reported in Schedule HC, item 4(a), that are high
volatility commercial real estate (HVCRE) exposures,14 including HVCRE exposures
that are 90 days or more past due or in nonaccrual status:
•

In column C–0% risk weight, include the portion of any HVCRE exposure
included in loans and leases HFS that is secured by collateral or has a guarantee
that qualifies for the zero percent risk weight. This would include the portion of
HVCRE exposures collateralized by deposits at the reporting institution.



In column G–20% risk weight, include the portion of any HVCRE exposure
included in loans and leases HFS that is secured by collateral or has a guarantee
that qualifies for the 20 percent risk weight. This would include the portion of any
HVCRE exposure covered by an FDIC loss-sharing agreement.



In column H–50% risk weight, include the portion of any HVCRE exposure
included in loans and leases HFS that is secured by collateral or has a guarantee
that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of any HVCRE exposure
included in loans and leases HFS that is secured by collateral or has a guarantee
that qualifies for the 100 percent risk weight.



In column J–150% risk weight, include the portion of the carrying value of high
volatility commercial real estate exposures, as defined in §.2 of the regulatory
capital rules, included in Schedule HC, item 4(a), excluding those portions of the
carrying value that are covered by qualifying collateral or eligible guarantees as
described in §.37 and §.36, respectively, of the regulatory capital rules.

14

High volatility commercial real estate (HVCRE) exposure means a credit facility that, prior to conversion to
permanent financing, finances or has financed the acquisition, development, or construction (ADC) of real property,
unless the facility finances:
(1) One- to four-family residential properties;
(2) Real property that:
(i.) would qualify as an investment in community development under 12 U.S.C. 338a or 12 U.S.C. 24
(Eleventh), as applicable, or as a ‘‘qualified investment’’ under [12 CFR part 228], and
(ii.) is not an ADC loan to any entity described in [12 CFR 208.22(a)(3) or 228.12(g)(3)], unless it is otherwise
described in paragraph (1), (2)(i), (3) or (4) of this definition;
(3) The purchase or development of agricultural land, which includes all land known to be used or usable for
agricultural purposes (such as crop and livestock production), provided that the valuation of the agricultural land is
based on its value for agricultural purposes and the valuation does not take into consideration any potential use of
the land for non-agricultural commercial development or residential development; or
(4) Commercial real estate projects in which:
(i.) the loan-to-value ratio is less than or equal to the applicable maximum supervisory loan-to-value ratio in the
real estate lending standards at [12 CFR part 208, appendix C];
(ii.) The borrower has contributed capital to the project in the form of case or unencumbered readily marketable
asset (or has paid development expenses out-of-pocket) of at least 15 percent of the real estate’s appraised ‘‘as
completed’’ value; and
(iii.) The borrower contributed the amount of capital required by paragraph (4)(ii) of this definition before the
holding company advances funds under the credit facility, and the capital contributed by the borrower, or internally
generated by the project, is contractually required to remain in the project throughout the life of the project. The life
of a project concludes only when the credit facility is converted to permanent financing or is sold or paid in full.
Permanent financing may be provided by the holding company that provided the ADC facility as long as the
permanent financing is subject to the holding company’s underwriting criteria for long-term mortgage loans.
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In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any HVCRE exposure included in loans and leases HFS reported in
Schedule HC, item 4(a), that is secured by qualifying financial collateral that
meets the definition of a securitization exposure in §.2 of the regulatory capital
rules or is a mutual fund only if the holding company chooses to recognize the
risk-mitigating effects of the securitization exposure or mutual fund collateral
under the simple approach outlined in §.37 of the regulatory capital rules. Under
the simple approach, the risk weight assigned to the collateralized portion of the
exposure may not be less than 20 percent.
o Include in column R the carrying value of the portion of an HFS HVCRE
exposure that is secured by the fair value of securitization exposure or mutual
fund collateral that meets the general requirements of the simple approach in
§.37. In addition, the holding company must apply the same approach to
securitization exposure collateral – either the Simplified Supervisory Formula
Approach or the Gross-Up Approach – that it applies to determine the riskweighted asset amounts of its on- and off-balance sheet securitization
exposures that are reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the HFS
exposure that is secured by such collateral. Any remaining portion of the HFS
exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.

4(c)

Exposures past due 90 days or more or on nonaccrual. Report in column A the
carrying value of loans and leases held for sale (HFS) reported in Schedule HC, item
4(a), that are 90 days or more past due or in nonaccrual status according to the
requirements set forth in §.32(k) of the regulatory capital rules. Do not include HFS
sovereign exposures or HFS residential mortgage exposures, as described in §.32(a)
and §.32(g), respectively, that are 90 days or more past due or in nonaccrual status
(report such past due and nonaccrual exposures in Schedule HC-R, Part II, item 4(d)
and item 4(a), respectively). Also do not include HFS high volatility commercial real
estate exposures that are 90 days or more past due or in nonaccrual status (report such
exposures in Schedule HC-R, Part II, item 4(b)).


In column C–0% risk weight, include the portion of loans and leases HFS
included in Schedule HC, item 4(a), that are 90 days or more past due or in
nonaccrual status (except as noted above), that is secured by collateral or has a
guarantee that qualifies for the zero percent risk weight. This would include the
portion of loans and leases HFS collateralized by deposits at the reporting
institution.



In column G–20% risk weight, include the portion of loans and leases HFS
included in Schedule HC, item 4(a), that are 90 days or more past due or in
nonaccrual status (except as noted above), that is secured by collateral or has a

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guarantee that qualifies for the 20 percent risk weight. This would include the
portion of HFS loans covered by an FDIC loss-sharing agreement.


In column H–50% risk weight, include the portion of loans and leases HFS
included in Schedule HC, item 4(a), that are 90 days or more past due or in
nonaccrual status (except as noted above), that is secured by collateral or has a
guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of loans and leases HFS
included in Schedule HC, item 4(a), that are 90 days or more past due or in
nonaccrual status (except as noted above), that is secured by collateral or has a
guarantee that qualifies for the 100 percent risk weight.



In column J–150% risk weight, include the carrying value of loans and leases HFS
included in Schedule HC, item 4(a), that are 90 days or more past due or in
nonaccrual status (except as noted above), excluding those portions that are
covered by qualifying collateral or eligible guarantees as described in §.37 and
§.36, respectively, of the regulatory capital rules.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any loans and leases HFS included in Schedule HC, item 4(a), that are
90 days or more past due or in nonaccrual status (except as noted above), that is
secured by qualifying financial collateral that meets the definition of a
securitization exposure in §.2 of the regulatory capital rules or is a mutual fund
only if the holding company chooses to recognize the risk-mitigating effects of
the securitization exposure or mutual fund collateral under the simple approach
outlined in §.37 of the regulatory capital rules. Under the simple approach, the
risk weight assigned to the collateralized portion of the exposure may not be less
than 20 percent.
o Include in column R the carrying value of the portion of an HFS loan or lease
that is 90 days or more past due or in nonaccrual status that is secured by the
fair value of securitization exposure or mutual fund collateral that meets the
general requirements of the simple approach in §.37. In addition, the holding
company must apply the same approach to securitization exposure collateral –
either the Simplified Supervisory Formula Approach or the Gross-Up
Approach – that it applies to determine the risk-weighted asset amounts of its
on- and off-balance sheet securitization exposures that are reported in
Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the HFS
exposure that is secured by such collateral. Any remaining portion of the HFS
exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.

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All other exposures. Report in column A the carrying value of loans and leases held
for sale (HFS) reported in Schedule HC, item 4(a), that are not reported in Schedule
HC-R, Part II, items 4(a) through 4(c) above:


In column C–0% risk weight, include the carrying value of the unconditionally
guaranteed portion of HFS Small Business Administration (SBA) “Guaranteed
Interest Certificates” purchased in the secondary market that are included in
Schedule HC-C. Also include the portion of any loans and leases HFS that that
are not reported in Schedule HC-R, Part II, items 4(a) through 4(c) above, that is
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight. This would include the portion of loans and leases HFS collateralized by
deposits at the reporting institution.

•

In column G–20% risk weight, include the carrying value of HFS loans to and
acceptances of other U.S. depository institutions that are reported in Schedule
HC-C, Part I, item 2, plus the carrying value of the guaranteed portion of HFS
SBA loans originated and held by the reporting holding company included in
Schedule HC-C, and the carrying value of the portion of HFS student loans
reinsured by the U.S. Department of Education included in Schedule HC-C,
item 6(d), “Other consumer loans.” Also include the portion of any loans and
leases HFS that that are not reported in Schedule HC-R, Part II, items 4(a)
through 4(c) above, that is secured by collateral or has a guarantee that qualifies
for the 20 percent risk weight. This would include the portion of loans and leases
HFS covered by FDIC loss-sharing agreements.



In column H–50% risk weight, include the carrying value of HFS loans that meet
the definition of presold construction loan in §.2 of the regulatory capital rules
that qualify for the 50 percent risk weight. Also include the portion of any loans
and leases HFS that that are not reported in Schedule HC-R, Part II, items 4(a)
through 4(c) above, that is secured by collateral or has a guarantee that qualifies
for the 50 percent risk weight.



In column I–100% risk weight, include the carrying value of HFS loans and leases
reported in Schedule HC, item 4(a), that are not included in columns C through J
and R. This item would include 1-4 family construction loans reported in
Schedule HC-C, item 1(a)(1) and loans secured by multifamily residential
properties reported in Schedule RC-C, item 1(d), with an original amount of
more than $1 million. Also include the carrying value of HFS loans that meet the
definition of presold construction loan in §.2 of the regulatory capital rules that
qualify for the 100 percent risk weight. Also include the portion of any loans and
leases HFS that that are not reported in Schedule HC-R, Part II, items 4(a)
through 4(c) above, that is secured by collateral or has a guarantee that qualifies
for the 100 percent risk weight.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any HFS loans and leases, including HFS eligible margin loans,
reported in Schedule HC, item 4(a), that is secured by qualifying financial
collateral that meets the definition of a securitization exposure in §.2 of the
regulatory capital rules or is a mutual fund only if the holding company chooses
to recognize the risk-mitigating effects of the securitization exposure or mutual
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fund collateral under the Simple Approach, or the collateral margin approach for
eligible margin loans, outlined in §.37 of the regulatory capital rules. Under the
Simple Approach, the risk weight assigned to the collateralized portion of the
exposure may not be less than 20 percent.
o Include in column R the carrying value of the portion of such an HFS loan or
lease that is secured by the fair value or adjusted fair value of securitization
exposure or mutual fund collateral as determined under the Simple Approach
or the Collateral Haircut Approach, respectively, however, the holding
company must apply the same approach to all eligible margin loans. In
addition, if the holding company applies the simple approach, it must apply
the same approach to securitization exposure collateral – either the Simplified
Supervisory Formula Approach or the Gross-Up Approach – that it applies to
determine the risk-weighted asset amounts of its on- and off-balance sheet
securitization exposures that are reported in Schedule HC-R, Part II, items 9
and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the HFS
exposure that is secured by such collateral. Any remaining portion of the HFS
exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.


5

All other HFS loans and leases held for sale that must be risk weighted according
to the Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II.
o The carrying value of other loans and leases held for sale reported in Schedule
HC, item 4(a), that are not reported in Schedule HC-R, Part II, items 4(a)
through 4(c) above.

Loans and leases, net of unearned income. Report in column A of the appropriate
subitem the carrying value of loans and leases, net of unearned income, reported in
Schedule HC, item 4(b), excluding those loans and leases, net of unearned income,
that qualify as securitization exposures as defined in §.2 of the regulatory capital
rules.
The carrying value of those loans and leases, net of unearned income, that qualify as
securitization exposures must be reported in Schedule HC-R, Part II, item 9(d),
column A.
The sum of Schedule HC-R, Part II, items 5(a) through 5(d), column A, plus the
carrying value of loans and leases, net of unearned income, that qualify as
securitization exposures and are reported in Schedule HC-R, Part II, item 9(d),
column A, must equal Schedule HC, item 4(b).

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Residential mortgage exposures. Report in column A the carrying value of loans,
net of unearned income, reported in Schedule HC, item 4(b), that are meeting the
definition of a residential mortgage exposure or a statutory multifamily mortgage in
§.2 of the regulatory capital rules. Include in this item the carrying value of loans, net
of unearned income, secured by multifamily residential properties with an original
and outstanding amount of $1 million or less that are reported in Schedule HC-C,
item 1(d), as they would meet the regulatory capital rules’ definition of residential
mortgage exposure. Exclude loans, net of unearned income, secured by multifamily
residential properties included in Schedule HC-C, item 1(d), that do not meet the
definition of a residential mortgage exposure or a statutory multifamily mortgage.
Also exclude 1-4 family residential construction loans, net of unearned income,
reported in Schedule HC-C, item 1.a.(1), which should be reported in Schedule HCR, Part II, items 5(c) or 5(d), as appropriate.


In column C–0% risk weight, include the portion of any exposure, net of unearned
income, that meets the definition of residential mortgage exposure or statutory
multifamily mortgage reported in Schedule HC, item 4(b), that is secured by
collateral or has a guarantee that qualifies for the zero percent risk weight. This
would include loans and leases, net of unearned income, collateralized by deposits
at the reporting institution.



In column G–20% risk weight, include the carrying value of the guaranteed
portion of FHA and VA mortgage loans, net of unearned income, included in
Schedule HC-C, item 1(c)(2)(a). Also include the portion of any loan, net of
unearned income, which meets the definition of residential mortgage exposure or
statutory multifamily mortgage reported in Schedule HC, item 4(b), that is
secured by collateral or has a guarantee that qualifies for the 20 percent risk
weight. This would include the portion of loans, net of unearned income, covered
by an FDIC loss-sharing agreement.



In column H–50% risk weight, include the carrying value of loans, net of
unearned income, secured by 1-4 family residential properties and by multifamily
residential properties included in Schedule HC-C, item 1(c)(1) (only include
qualifying first mortgage loans), qualifying loans from items 1(c)(2)(a) and 1(d),
or those that meet the definition of a residential mortgage exposure and qualify
for 50 percent risk weight under §.32(g) of the regulatory capital rules. For 1-4
family residential mortgages, the loans must be prudently underwritten, be fully
secured by first liens on 1-4 family or multifamily residential properties, not 90
days or more past due or in nonaccrual status, and have not been restructured or
modified (unless modified or restructured solely pursuant to the U.S. Treasury’s
Home Affordable Mortgage Program (HAMP)). Also include loans, net of
unearned income, that meet the definition of statutory multifamily mortgage in §.2
of the regulatory capital rules. Also include the portion of any loan, net of
unearned income, which meets the definition of residential mortgage exposure or
statutory multifamily mortgage reported in Schedule HC, item 4(b), that is
secured by collateral or has a guarantee that qualifies for the 50 percent risk
weight.
Notes:

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


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Refer to the definition of residential mortgage exposure in §.2 of the
regulatory capital rules and refer to the requirements for risk weighting
residential mortgage loans in §.32 of the regulatory capital rules.
A residential mortgage loan may receive a 50 percent risk weight if it meets
the qualifying criteria in §.32(g) of the regulatory capital rules:
o A property is owner-occupied or rented;
o The loan is prudently underwritten including the loan amount as a
percentage of the appraised value of the real estate collateral;
o The loan is not 90 days or more past due or on nonaccrual;
o The loan is not restructured or modified (except for loans restructured
solely pursuant to the U.S. Treasury’s HAMP).
o If the holding company holds the first-lien and junior –lien(s) on a
residential mortgage exposure, and no other party holds an intervening
lien, the holding company must combine the exposures and treat them as a
single first-lien residential mortgage exposure.
A first lien home equity line (HELOC) may qualify for 50 percent risk weight
if it meets the qualifying criteria.
A residential mortgage loan of $1 million or less on a property of more than 4
units may qualify for 50 percent risk weight if it meets the qualifying criteria.



In column I–100% risk weight, include the carrying value of loans, net of
unearned income, related to residential mortgage exposures reported in
Schedule HC, item 4(b), that are not included in columns C, G, H, or R. Also
include the portion of any loan, net of unearned income, which meets the
definition of residential mortgage exposure reported in Schedule HC, item 4(b),
that is secured by collateral or has a guarantee that qualifies for the 100 percent
risk weight.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any loan, net of unearned income, reported in Schedule HC, item 4(b),
that meets the definition of residential mortgage exposure or statutory multifamily
mortgage reported in Schedule RC, item 4.b, and is secured by qualifying
financial collateral that meets the definition of a securitization exposure in §.2 of
the regulatory capital rules or is a mutual fund only if the holding company
chooses to recognize the risk-mitigating effects of the securitization exposure or
mutual fund collateral under the simple approach outlined in §.37 of the
regulatory capital rules. Under the simple approach, the risk weight assigned to
the collateralized portion of the exposure may not be less than 20 percent.
o Include in column R the carrying value of the portion of a loan exposure that
is secured by the fair value of securitization exposure or mutual fund collateral
that meets the general requirements of the simple approach in §.37. In
addition, the holding company must apply the same approach to securitization
exposure collateral – either the Simplified Supervisory Formula Approach or
the Gross-Up Approach – that it applies to determine the risk-weighted asset
amounts of its on- and off-balance sheet securitization exposures that are
reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the loan
exposure that is secured by such collateral. Any remaining portion of the loan
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exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.
5(b)

15

High volatility commercial real estate exposures. Report in Column A the portion
of the carrying value of loans, net of unearned income, reported in Schedule HC, item
4(b), that are high volatility commercial real estate exposures (HVCRE),15 including
HVCRE exposures that are 90 days or more past due or in nonaccrual status:


In column C–0% risk weight, include the portion of any HVCRE exposure
included in loans and leases, net of unearned income, that is secured by collateral
or has a guarantee that qualifies for the zero percent risk weight. This would
include the portion of HVCRE exposures, net of unearned income, collateralized
by deposits at the reporting institution.



In column G–20% risk weight, include the portion of any HVCRE exposure
included in loans and leases, net of unearned income, that is secured by collateral
or has a guarantee that qualifies for the 20 percent risk weight. This would include
the portion of any HVCRE exposure covered by an FDIC loss-sharing agreement.



In column H–50% risk weight, include the portion of any HVCRE exposure
included in loans and leases, net of unearned income, that is secured by collateral
or has a guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of any HVCRE exposure
included in loans and leases, net of unearned income, that is secured by collateral
or has a guarantee that qualifies for the 100 percent risk weight.



In column J–150% risk weight, include the carrying value of high volatility
commercial real estate exposures, as defined in §.2 of the regulatory capital rules,
included in Schedule HC, item 4(b), excluding those portions of the carrying
value that are covered by qualifying collateral or eligible guarantees as described
in §.37 and §.36, respectively, of the regulatory capital rules.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any HVCRE exposure included in loans and leases, net of unearned
income, reported in Schedule RC, item 4.b, that is secured by qualifying financial
collateral that meets the definition of a securitization exposure in §.2 of the
regulatory capital rules or is a mutual fund only if the holding company chooses
to recognize the risk-mitigating effects of the securitization exposure or mutual
fund collateral under the simple approach outlined in §.37 of the regulatory
capital rules. Under the simple approach, the risk weight assigned to the
collateralized portion of the exposure may not be less than 20 percent.
o Include in column R the carrying value of the portion of an HVCRE exposure
that is secured by the fair value of securitization exposure or mutual fund

See instructions for Schedule HC-R, Part II, item 4(b), above for the definition of HVCRE exposure.
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collateral that meets the general requirements of the simple approach in §.37.
In addition, the holding company must apply the same approach to
securitization exposure collateral – either the Simplified Supervisory Formula
Approach or the Gross-Up Approach – that it applies to determine the riskweighted asset amounts of its on- and off-balance sheet securitization
exposures that are reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the
HVCRE exposure that is secured by such collateral. Any remaining portion
of the HVCRE exposure that is uncollateralized or collateralized by other
qualifying collateral would be reported in columns C through J, as
appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.
5(c)

Exposures past due 90 days or more or on nonaccrual. Report in column A the
carrying value of loans and leases, net of unearned income, reported in Schedule HC,
item 4(b), that are 90 days or more past due or in nonaccrual status according to the
requirements set forth in in §.32(k) of the regulatory capital rules. Do not include
sovereign exposures or residential mortgage exposures, as described in §.32(a) and
§.32(g) respectively, that are 90 days or more past due or in nonaccrual status (report
such past due and nonaccrual exposures in Schedule HC-R, Part II, items 5(d) and
5(a), respectively ). Also do not include high volatility commercial real estate
exposures that are 90 days or more past due or in nonaccrual status (report such
exposures in Schedule HC-R, Part II, item 5(b)).


In column C–0% risk weight, include the portion of loans and leases, net of
unearned income, included in Schedule HC, item 4(b), that are 90 days or more
past due or in nonaccrual status (except as noted above), that is secured by
collateral or has a guarantee that qualifies for the zero percent risk weight. This
would include the portion of loans and leases, net of unearned income,
collateralized by deposits at the reporting institution.



In column G–20% risk weight, include the portion of loans and leases, net of
unearned income, included in Schedule HC, item 4(b), that are 90 days or more
past due or in nonaccrual status (except as noted above), that is secured by
collateral or has a guarantee that qualifies for the 20 percent risk weight. This
would include the portion of loans and leases, net of unearned income, covered by
an FDIC loss-sharing agreement.



In column H–50% risk weight, include the portion of loans and leases, net of
unearned income, included in Schedule HC, item 4(b), that are 90 days or more
past due or in nonaccrual status (except as noted above), that is secured by
collateral or has a guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of loans and leases, net of
unearned income, included in Schedule HC, item 4(b), that are 90 days or more

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past due or in nonaccrual status (except as noted above), that is secured by
collateral or has a guarantee that qualifies for the 100 percent risk weight.


In column J–150% risk weight, include the carrying value of loans and leases, net
of unearned income, included in Schedule HC, item 4(b), that are 90 days or more
past due or in nonaccrual status (except as noted above), excluding those portions
that are covered by qualifying collateral or eligible guarantees as described in
§.37 and §.36, respectively, of the regulatory capital rules.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any loans and leases, net of unearned income, included in
Schedule HC, item 4(a), that are 90 days or more past due or in nonaccrual status
(except as noted above), that is secured by qualifying financial collateral that
meets the definition of a securitization exposure in §.2 of the regulatory capital
rules or is a mutual fund only if the holding company chooses to recognize the
risk-mitigating effects of the securitization exposure or mutual fund collateral
under the simple approach outlined in §.37 of the regulatory capital rules. Under
the simple approach, the risk weight assigned to the collateralized portion of the
exposure may not be less than 20 percent.
o Include in column R the carrying value of the portion of a loan or lease, net of
unearned income, that is 90 days or more past due or in nonaccrual status that
is secured by the fair value of securitization exposure or mutual fund collateral
that meets the general requirements of the simple approach in §.37. In
addition, the holding company must apply the same approach to securitization
exposure collateral – either the Simplified Supervisory Formula Approach or
the Gross-Up Approach – that it applies to determine the risk-weighted asset
amounts of its on- and off-balance sheet securitization exposures that are
reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the loan or
lease exposure that is secured by such collateral. Any remaining portion of
the loan and lease, net of unearned income, that is uncollateralized or
collateralized by other qualifying collateral would be reported in columns C
through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.

5(d)

All other exposures. Report in column A the carrying value of loans and leases, net
of unearned income, reported in Schedule HC, item 4(b), that are not reported in
items 5(a) through 5(c) above:


In column C–0% risk weight, include the carrying value of the unconditionally
guaranteed portion of SBA “Guaranteed Interest Certificates” purchased in the
secondary market that are included in Schedule HC-C, net of unearned income.
Also include the portion of any loans and leases, net of unearned income, not
reported in Schedule HC-R, Part II, items 5(a) through 5(c) above, that is secured
by collateral or has a guarantee that qualifies for the zero percent risk weight.

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This would include the portion of loans and leases, net of unearned income,
collateralized by deposits at the reporting institution.


In column G–20% risk weight, include the carrying value of loans to and
acceptances of other U.S. depository institutions, net of unearned income, that are
reported in Schedule HC-C, item 2 (excluding the carrying value of any long-term
exposures to non-OECD banks), plus the carrying value, net of unearned income,
of the guaranteed portion of SBA loans originated and held by the reporting
holding company included in Schedule HC-C, and the carrying value, net of
unearned income, of the portion of student loans reinsured by the U.S.
Department of Education included in Schedule HC-C, item 6(d), "Other consumer
loans." Also include the portion of any loans and leases, net of unearned income,
not reported in Schedule HC-R, Part II, items 5(a) through 5(c) above, that is
secured by collateral or has a guarantee that qualifies for the 20 percent risk
weight. This would include the portion of loans and leases, net of unearned
income, covered by FDIC loss-sharing agreements.



In column H–50% risk weight, include the carrying value of loans and leases, net
of unearned income, that meet the definition of presold construction loan in §.2 of
the regulatory capital rules that qualify for the 50 percent risk weight. Also
include the portion of any loans and leases, net of unearned income, not reported
in Schedule HC-R, Part II, items 5(a) through 5(c) above, that is secured by
collateral or has a guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the carrying value of loans and leases, net
of unearned income, reported in Schedule HC, item 4(b), that is not included in
columns C through H, J or R (excluding loans that are assigned a higher than 100
percent risk weight, such as HVCRE loans and past due loans). This item would
include 1-4 family construction loans and leases, net of unearned income,
reported in Schedule HC-C, item 1(a)(1) and the portion of loans, net of unearned
income, secured by multifamily residential property reported in Schedule HC-C,
item 1(d), with an original amount of more than $1 million. Also include the
carrying value of loans and leases, net of unearned income, that meet the
definition of presold construction loan in §.2 of the regulatory capital rules that
qualify for the 100 percent risk weight. Also include the portion of any loans and
leases, net of unearned income, not reported in Schedule HC-R, Part II, items 5(a)
through 5(c) above, that is secured by collateral or has a guarantee that qualifies
for the 100 percent risk weight.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any loans and leases, net of unearned income, including eligible margin
loans, reported in Schedule HC, item 4(b), that is secured by qualifying financial
collateral that meets the definition of a securitization exposure in §.2 of the
regulatory capital rules or is a mutual fund only if the holding company chooses
to recognize the risk-mitigating effects of the securitization exposure or mutual
fund collateral under the simple approach, or the collateral margin approach for
eligible margin loans, outlined in §.37 of the regulatory capital rules. Under the
simple approach, the risk weight assigned to the collateralized portion of the
exposure may not be less than 20 percent.

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o Include in column R the carrying value of the portion of such a loan or lease,
net of unearned income, that is secured by the fair value or adjusted fair value
of securitization exposure or mutual fund collateral as determined under the
simple approach or the collateral haircut approach, respectively; however, the
holding company must apply the same approach for all eligible margin loans.
In addition, if the holding company applies the simple approach, it must apply
the same approach to securitization exposure collateral – either the Simplified
Supervisory Formula Approach or the Gross-Up Approach – that it applies to
determine the risk-weighted asset amounts of its on- and off-balance sheet
securitization exposures that are reported in Schedule HC-R, Part II, items 9
and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the loan or
lease, net of unearned income, that is secured by such collateral. Any
remaining portion of the loan or lease exposure that is uncollateralized or
collateralized by other qualifying collateral would be reported in columns C
through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.


All other loans and leases, net of unearned income, that must be risk weighted
according to the Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II.
o The carrying value of other loans and leases, net of unearned income, reported
in Schedule HC, item 4(b), that are not reported in Schedule HC-R, Part II,
items 5(a) through 5(c) above.

6

LESS: Allowance for loan and lease losses. Report in columns A and B the
balance of the allowance for loan and lease losses reported in Schedule HC, item 4(c).

7

Trading assets. Report in column A the fair value of trading assets reported in
Schedule HC, item 5, excluding those trading assets that are securitization exposures,
as defined in §.2 of the regulatory capital rules.
The fair value of those trading assets reported in Schedule HC, item 5, that qualify as
securitization exposures must be reported in Schedule HC-R, Part II, item 9.c, column
A. The sum of Schedule HC-R, Part II, items 7 and 9(c), column A, must equal
Schedule HC, item 5.
If the holding company is subject to the market risk capital rules, include in column B
the fair value of all trading assets that are covered positions as defined in Schedule
HC-R, Part II, item 27 (except those trading assets that are both securitization
exposures and covered positions, which are excluded from column A of this item 7
and are to be reported instead in Schedule HC-R, Part II, item 9(c), column A). The

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holding company will report its standardized market risk-weighted assets in Schedule
HC-R, Part II, item 27.
For holding companies not subject to the market risk capital rule and for those trading
assets reported in column A that are held by holding companies subject to the market
risk capital rule and do not meet the definition of a covered position:


In column B, if the holding company completes Schedule HC-D, include the fair
value of derivative contracts that are reported as assets in Schedule HC-D, item 11
(column A). If the holding company does not complete Schedule HC-D, include
the portion of the amount reported in Schedule HC, item 5, that represents the fair
value of derivative contracts that are assets. Exclude from column B those
derivative contracts reported in these items that qualify as securitization
exposures. For purposes of risk weighting, include the credit equivalent amounts
of these derivatives, determined in accordance with the regulatory capital rules, in
the risk weight categories in Schedule HC-R, Part II, items 20 and 21, as
appropriate. Do not risk weight these derivatives in this item.
Also include in column B the fair value of any unsettled transactions (failed
trades) that are reported as trading assets in Schedule HC, item 5. For purposes of
risk weighting, unsettled transactions are to be reported in Schedule HC-R, Part
II, item 22.



In column C–0% risk weight, if the holding company completes Schedule HC-D,
include the fair value of those trading assets reported in Schedule HC-D that do
not qualify as securitization exposures that qualify for the zero percent risk
weight. Such trading assets may include portions of, but may not be limited to:
o Item 1, "U.S. Treasury securities," (column A),
o The portion of the amount reported in item 2, (column A) that represents the
fair value of securities issued by U.S. Government agencies, and
o The portion of the amounts reported in item 4, (column A) that represents the
fair value of mortgage-backed securities guaranteed by GNMA.
o If the holding company does not complete Schedule HC-D, include the
portion of the amount reported in Schedule HC, item 5, that represents the fair
value of the preceding types of securities. Exclude those trading assets
reported in Schedule HC, item 5, that qualify as securitization exposures and
report them in Schedule HC-R, Part II, item 9(c).
o Also include the portion of the fair value of any trading assets that is secured
by collateral or has a guarantee that qualifies for the zero percent risk weight.
This would include the portion of trading assets collateralized by deposits at
the reporting institution.



In column G–20% risk weight, if the holding company completes Schedule HC-D,
include the fair value of those trading assets reported in Schedule HC-D that do
not qualify as securitization exposures that qualify for the 20 percent risk weight.
Such trading assets may include portions of, but may not be limited to:
o Item 2, (column A) that represents the fair value of securities issued by U.S.
Government-sponsored agencies,

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o The portion of the amount reported in item 3, (column A) that represents the
fair value of general obligations issued by states and political subdivisions in
the U.S.,
o The portion of the amount reported in item 4, (column A) that represents the
fair value of mortgage-backed securities issued by FNMA and FHLMC,
o The fair value of those asset-backed securities, structured financial products,
and other debt securities reported in item 5, "Other debt securities," (column
A) that represent exposures to U.S. depository institutions,
o The portion of the amount reported in item 6(d), “Other loans,” (column A)
that represents loans to and acceptances of U.S. depository institutions, and
o The portion of the amount reported in item 9, "Other trading assets," (column
A) that represents the fair value of certificates of deposit.
o If the holding company does not complete Schedule HC-D, include the
portion of the amount reported in Schedule HC, item 5, that represents the fair
value of the preceding types of trading assets. Exclude those trading assets
reported in Schedule HC, item 5, that qualify as securitization exposures and
report them in Schedule HC-R, Part II, item 9(c).
o Also include the portion of the fair value of any trading assets that is secured
by collateral or has a guarantee that qualifies for the 20 percent risk weight.
This would include the portion of trading assets covered by FDIC loss-sharing
agreements.


In column H–50% risk weight, if the holding company completes Schedule HC-D,
include the fair value of those trading assets reported in Schedule HC-D that do
not qualify as securitization exposures reported in HC-D that qualify for the 50
percent risk weight. Such trading assets may include portions of, but may not be
limited to:
o Item 3, (column A) that represents the fair value of revenue obligations issued
by states and political subdivisions in the U.S., and
o The fair value of those mortgage-backed securities reported in item 4,
"Mortgage-backed securities," (column A).
o If the holding company does not complete Schedule HC-D, include the
portion of the amount reported in Schedule HC, item 5, that represents the fair
value of the preceding types of trading assets. Exclude those trading assets
reported in Schedule HC, item 5, that qualify as securitization exposures and
report them in Schedule HC-R, Part II, item 9(c).
o Also include the portion of the fair value of any trading assets that is secured
by collateral or has a guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, if the holding company completes Schedule HCD, include the fair value of those trading assets reported in Schedule HC-D that
do not qualify as securitization exposures that qualify for the 100 percent risk
weight. Such trading assets may include portions of, but may not be limited to:
o The fair value of those mortgage-backed securities reported in item 4,
"Mortgage-backed securities," (column A), and
o Item 5, "Other debt securities," (column A) that represent exposures to
corporate entities and special purpose vehicles (SPVs).
o If the holding company does not complete Schedule HC-D, include the
portion of the amount reported in Schedule HC, item 5, that represents the fair
value of the preceding types of trading assets. Exclude those trading assets
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reported in Schedule HC, item 5, that qualify as securitization exposures and
report them in Schedule HC-R, Part II, item 9(c).
o Also include the fair value of significant investments in the capital of
unconsolidated financial institutions in the form of common stock held as
trading assets that does not exceed the 10 percent and 15 percent common
equity tier 1 capital deduction thresholds and are included in capital, as
described in §.22 of the regulatory capital rules.16 Publicly traded equity
exposures and equity exposures to investment funds (including mutual funds)
reported in Schedule HC, item 5, to the extent that the aggregate carrying
value of the holding company’s equity exposures does not exceed 10 percent
of total capital. If the holding company’s aggregate carrying value of equity
exposures is greater than 10 percent of total capital, the holding company
must report its trading equity exposures in columns L, M, or N, as appropriate.
o Also include the fair value of trading assets reported in Schedule HC, item 5,
that is not included in columns C through N and R. Exclude those trading
assets reported in Schedule HC, item 5, that qualify as securitization
exposures and report them in Schedule HC-R, Part II, item 9(c).
o Also include the portion of the fair value of any trading assets that is secured
by collateral or has a guarantee that qualifies for the 100 percent risk weight.

16



In column J–150% risk weight, include the exposure amounts of trading assets
reported in Schedule HC, item 5, that are past due 90 days or more or in
nonaccrual status (except sovereign exposures), excluding those portions that are
covered by qualifying collateral or eligible guarantees as described in §.37 and
§.36, respectively, of the regulatory capital rules.



In column K–250% risk weight, if the holding company completes Schedule HCD, include the fair value of those trading assets reported in Schedule HC-D, item
9, that do not qualify as securitization exposures that represents exposures that are
significant investments in the common stock of unconsolidated financial
institutions that are not deducted from capital. For further information on the
treatment of equity exposures, refer to §.51 to .53 of regulatory capital rules. This
risk weight takes effect in 2018, and therefore this item is blocked from being
completed until that time. Before 2018, report such significant investments in the
100 percent risk weight category. If the holding company does not complete
Schedule HC-D, include the portion of the amount reported in Schedule HC, item
5, that represents the fair value of the preceding types of trading assets.



In column L–300% risk weight, if the holding company completes Schedule HCD, include the fair value of those trading assets reported in Schedule HC-D, item
9, that do not qualify as securitization exposures that represents publicly traded
equity securities with readily determinable fair values (NOTE: Certain
investments in mutual funds reported in Schedule HC-D, item 9, may be riskweighted using the simple risk-weight and look-through approaches as described
in §.51 to .53 of the regulatory capital rules). If the holding company does not
complete Schedule HC-D, include the portion of the amount reported in Schedule
HC, item 5, that represents the fair value of the preceding types of trading assets.

Note: This item will become subject to a 250 percent risk weight beginning in 2018.
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

In column M–400% risk weight, if the bank completes Schedule HC-D, include
the fair value of those trading assets reported in Schedule HC-D, item 9, that do
not qualify as securitization exposures that represent equity securities (other than
those issued by investment firms) that do not have readily determinable fair
values. If the bank does not complete Schedule HC-D, include the portion of the
amount reported in Schedule HC, item 5, that represents the fair value of the
preceding type of trading assets.



In column N–600% risk weight, if the holding company completes Schedule HCD, include the fair value of those trading assets reported in Schedule HC-D, item
9, that do not qualify as securitization exposures that represent equity exposures
to investment firms. If the holding company does not complete Schedule HC-D,
include the portion of the amount reported in Schedule HC, item 5, that represents
the fair value of the preceding type of trading assets.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any trading assets reported in Schedule HC, item 5, that is secured by
qualifying financial collateral that meets the definition of a securitization
exposure in §.2 of the regulatory capital rules or is a mutual fund only if the
holding company chooses to recognize the risk-mitigating effects of the
securitization exposure or mutual fund collateral under the simple approach
outlined in §.37 of the regulatory capital rules. Under the simple approach, the
risk weight assigned to the collateralized portion of the exposure may not be less
than 20 percent.
o Include in column R the fair value of the portion of a trading asset that is
secured by the fair value of securitization exposure or mutual fund
collateral that meets the general requirements of the simple approach in
§.37. In addition the holding company must apply the same approach to
securitization exposure collateral – either the Simplified Supervisory
Formula Approach or the Gross-up Approach – that it applies to determine
the risk-weighted asset amounts of its on- and off-balance sheet
securitization exposures that are reported in Schedule HC-R, Part II, items
9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the
trading asset secured by such collateral. Any remaining portion of the
trading asset that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.



In columns R and S—Application of Other Risk-Weighting Approaches, also
include the holding company’s equity exposures to investment funds (including
mutual funds) reported as trading assets in Schedule HC, item 5, if the aggregate
carrying value of the holding company’s equity exposures is greater than 10
percent of total capital. Report in column R the exposure amount of these equity
exposures to investment funds. Report in column S the risk-weighted asset
amount of these equity exposures to investment funds as measured under the full
look-through approach, the simple modified look-through approach, or the
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alternative modified look-through approach as described in §.53 of the regulatory
capital rules. All three of these approaches require a minimum risk weight of 20
percent. For further information, refer to the discussion of “Treatment of Equity
Exposures” in the General Instructions for Schedule HC-R, Part II.


8

Trading assets that must be risk-weighted according to the Country Risk
Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include the portions of those
exposures reported in Schedule HC-D that are directly and unconditionally
guaranteed by foreign central governments or are exposures on foreign banks
that do not qualify as securitization exposures. Such exposures may include
portions of, but may not be limited to:
o The fair value of those mortgage-backed securities reported in Schedule HCD, item 4, "Mortgage-backed securities," (column A), and
o Other debt securities reported in Schedule HC-D item 5, "Other debt
securities," (column A), issued by foreign banks and foreign sovereign units.
o If the holding company does not complete Schedule HC-D, include the
portion of the amount reported in Schedule HC, item 5, that represents the fair
value of the preceding types of trading assets. Exclude those trading assets
reported in Schedule HC, item 5, that qualify as securitization exposures and
report them in Schedule HC-R, Part II, item 9(c).

All other assets. Report in column A the sum of the amounts reported in Schedule
HC, item 6, "Premises and fixed assets”; item 7, "Other real estate owned”; item 8,
"Investments in unconsolidated subsidiaries and associated companies”; item 9,
“Direct and indirect investments in real estate ventures”; item 10(a), "Goodwill";
item 10(b), "Other intangible assets;" and item 11, "Other assets," excluding those
assets reported in Schedule HC, items 6 through 11, that qualify as securitization
exposures as defined in §.2 of the regulatory capital rules. The amount of those assets
reported in Schedule HC, items 6 through 11, that qualify as securitization exposures
must be reported in Schedule HC-R, Part II, item 9(d), column A.
The sum of Schedule HC-R, Part II, item 8, columns B through R (including items
8(a) and 8(b), column R), must equal Schedule HC-R, Part II, item 8, column A.
Treatment of Defined Benefit Postretirement Plan Assets - Applicable Only to
Holding Companies That Have Made the Accumulated Other Comprehensive Income
(AOCI) Opt-Out Election in Schedule HC-R, Part I, item 3(a)
If the reporting institution sponsors a single-employer defined benefit postretirement
plan, such as a pension plan or health care plan, accounted for in accordance with
ASC Subtopic 715-20, Compensation-Retirement Benefits – Defined Benefit PlansGeneral (formerly FASB Statement No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans”), the institution should adjust the
asset amount reported in column A of this item for any amounts included in
Schedule HC, item 26(b), “Accumulated other comprehensive income”, affecting
assets as a result of the initial and subsequent application of the funded status and
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measurement date provisions of ASC Subtopic 715-20. The adjustment also should
take into account subsequent amortization of these amounts from AOCI into earnings.
The intent of the adjustment reported in this item (together with the amount reported
in Schedule HC-R, Part I, item 9(d)) is to reverse the effects on AOCI of applying
ASC Subtopic 715-20 for regulatory capital purposes. Specifically, assets recognized
or derecognized as an adjustment to AOCI as part of the incremental effect of
applying ASC Subtopic 715-20 should be reported as an adjustment to assets in
column B of this item. For example, the derecognition of an asset recorded as an
offset to AOCI as part of the initial incremental effect of applying ASC Subtopic 71520 should be reported in this item as a negative amount in column B and as a positive
amount in column I. As another example, the portion of a benefit plan surplus asset
that is included in Schedule HC, item 26(b), as an increase to AOCI and in column A
of this item should be excluded from risk-weighted assets by reporting the amount as
a positive number in column B of this item.


In column B, include the amount of:
o Any goodwill net of associated deferred tax liabilities (DTLs) reported in
Schedule HC-R, Part I, item 6;
o Intangible assets (other than goodwill and mortgage servicing assets (MSAs)),
net of associated DTLs reported in Schedule HC-R, Part I, item 7;
o Deferred tax assets (DTAs) that arise from net operating loss and tax credit
carryforwards, net of any related valuation allowances and net of DTLs
reported in Schedule HC-R, Part I, item 8;
o The fair value of derivative contracts that are reported as assets in Schedule
HC, item 11 (holding companies should risk weight the credit equivalent
amount of these derivative contracts in Schedule HC-R, Part II, item 20 or 21,
as appropriate);
o Items subject to the 10 percent and 15 percent common equity tier 1 capital
threshold limitations that have been deducted for risk-based capital purposes
in Schedule HC-R, Part I, items 13 through 16. These excess amounts pertain
to three items:
 Significant investments in the capital of unconsolidated financial
institutions in the form of common stock;
 Mortgage servicing assets; and
 DTAs arising from temporary differences that could not be realized
through net operating loss carrybacks, net of related valuation allowances.
o The holding company’s investments in unconsolidated banking and finance
subsidiaries that are reported in Schedule HC, item 8, and have been deducted
for risk-based capital purposes in Schedule HC-R, Part I, item 33; and
o Unsettled transactions (failed trades) that are reported as “Other assets” in
Schedule HC, item 11. For purposes of risk weighting, unsettled transactions
are to be reported in Schedule HC-R, Part II, item 22.
Report as a negative number in column B the amount of default fund
contributions in the form of commitments made by a clearing member to a central
counterparty’s mutualized loss sharing arrangement.



In column C–0% risk weight, include:
o The carrying value of Federal Reserve Bank stock included in Schedule HC-F,
item 4;
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o Accrued interest receivable on assets included in the zero percent risk weight
category (column C of Schedule HC-R, Part II, items 1 through 7);
o The carrying value of gold bullion not held for trading that is held in the
holding company's own vault or in another holding company’s or bank’s vault
on an allocated basis, and exposures that arise from the settlement of cash
transactions (such as equities, fixed income, spot foreign exchange, and spot
commodities) with a central counterparty where there is no assumption of
ongoing credit risk by the central counterparty after settlement of the trade and
associated default fund contributions; and
o The portion of assets reported in Schedule HC, items 6 through 11, that is
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight. This would include the portion of these assets collateralized by
deposits in the reporting institution.

17



In column G–20% risk weight, include:
o The carrying value of Federal Home Loan Bank stock included in Schedule
HC-F, item 4;
o Accrued interest receivable on assets included in the 20 percent risk weight
category (column G of Schedule HC-R, Part II, items 1 through 7);
o The portion of customers' acceptance liability reported in Schedule HC, item
11, that has been participated to other depository institutions; and
o The portion of assets reported in Schedule HC, items 6 through 11, that is
secured by collateral or has a guarantee that qualifies for the 20 percent risk
weight. This would include the portion of these assets covered by FDIC losssharing agreements.



In column H–50% risk weight, include accrued interest receivable on assets
included in the 50 percent risk weight category (column H of Schedule HC-R,
Part II, items 1 through 7). Also include the portion of assets reported in
Schedule HC, items 6 through 11, that is secured by collateral or has a guarantee
that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include:
o Accrued interest receivable on assets included in the 100 percent risk weight
category (column I of Schedule HC-R, Part II, items 1 through 7);
o The amount of all other assets reported in column A that is not included in
columns B through N or R.
o The amounts of items that do not exceed the 10 percent and 15 percent
common equity tier 1 capital deduction thresholds and are included in capital,
as described in §.22 of the regulatory capital rules. These amounts pertain to
three items:17
 Significant investments in the capital of unconsolidated financial
institutions in the form of common stock;
 Mortgage servicing assets; and
 DTAs arising from temporary differences that could not be realized
through net operating loss carrybacks, net of related valuation
allowances.

Note: these items will become subject to a 250 percent risk weight beginning in 2018.
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o Publicly traded equity exposures, equity exposures without readily
determinable fair values, and equity exposures to investment funds, to the
extent that the aggregate carrying value of the holding company’s equity
exposures does not exceed 10 percent of total capital. If the holding
company’s aggregate carrying value of equity exposures is greater than 10
percent of total capital, the holding company must report its equity exposures
reported in Schedule HC, items 6 through 11 in either columns L, M, or N, as
appropriate; and
o The portion of assets reported in Schedule HC, items 6 through 11, that is
secured by collateral or has a guarantee that qualifies for the 100 percent risk
weight.


In column J–150% risk weight, include accrued interest receivable on assets
included in the 150 percent risk weight category (column J of Schedule HC-R,
Part II, items 1 through 7). Also include the portion of assets reported in
Schedule HC, items 6 through 11, that is secured by collateral or has a guarantee
that qualifies for the 150 percent risk weight.



In column L–300% risk weight, include the fair value of publicly traded equity
securities with readily determinable fair values that are reported in Schedule HC,
items 8 and 9.



In column M–400% risk weight, include the historical cost of equity securities
(other than those issued by investment firms) that do not have readily
determinable fair values that are reported in Schedule HC-F, item 4.



In column N–600% risk weight, include the historical cost of equity securities
issued by investment firms that do not have readily determinable fair values that
are reported in Schedule HC-F, item 4.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of any asset reported in Schedule HC, items 6 through 11, that is secured
by qualifying financial collateral that meets the definition of a securitization
exposure in §.2 of the regulatory capital rules or is a mutual fund only if the
holding company chooses to recognize the risk-mitigating effects of the
securitization exposure or mutual fund collateral under the simple approach
outlined in §.37 of the regulatory capital rules. Under the simple approach, the
risk weight assigned to the collateralized portion of the exposure may not be less
than 20 percent.
o Include in column R the carrying value of the portion of an asset that is
secured by the fair value of securitization exposure or mutual fund collateral
that meets the general requirements of the simple approach in §.37.
o In addition, the holding company must apply the same approach to
securitization exposure collateral – either the Simplified Supervisory Formula
Approach or the Gross-up Approach – that it applies to determine the riskweighted asset amounts of its on- and off-balance sheet securitization
exposures that are reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of the asset
secured by such collateral. Any remaining portion of the asset that is
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uncollateralized or collateralized by other qualifying collateral would be
reported in columns C through J.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the General
Instructions for Schedule HC-R, Part II.


In columns R and S—Application of Other Risk-Weighting Approaches, also
include the holding company’s equity exposures to investment funds (including
mutual funds) reported in Schedule HC, item 8 or 11, if the aggregate carrying
value of the holding company’s equity exposures is greater than 10 percent of
total capital. Report in column R the exposure amount of these equity exposures
to investment funds. Report in column S the risk-weighted asset amount of these
equity exposures to investment funds as measured under the full look-through
approach, the simple modified look-through approach, or the alternative modified
look-through approach as described in §.53 of the regulatory capital rules. All
three of these approaches require a minimum risk weight of 20 percent. For
further information, refer to the discussion of “Treatment of Equity Exposures” in
the General Instructions for Schedule HC-R, Part II.



In columns R and S of item 8.a—Separate Account Bank-Owned Life Insurance,
include the holding company’s investments in separate account life insurance
products, including hybrid separate account life insurance products. Exclude
from columns R and S any investment in bank-owned life insurance that is solely
a general account insurance product (report such general account insurance
products in column I—100 percent risk weight). Report in column R the carrying
value of the holding company’s investments in separate account life insurance
products, including hybrid separate account products. Report in column S the
risk-weighted asset amount of these insurance products. When a holding
company has a separate account policy, the portion of the carrying value that
represents general account claims on the insurer, including items such as deferred
acquisition costs (DAC) and mortality reserves realizable as of the balance sheet
date and any portion of the carrying value attributable to a Stable Value
Protection (SVP) contract, these amounts should be risk weighted at the 100
percent risk weight as claims on the insurer or the SVP provider. The remaining
portion of the investment in separate account life insurance products is an equity
exposure to an investment fund that should be measured under the full lookthrough approach, the simple modified look-through approach, or the alternative
modified look-through approach, all three of which require a minimum risk
weight of 20 percent. For further information, refer to the discussion of
“Treatment of Equity Exposures” in the General Instructions for Schedule HC-R,
Part II.



In columns R and S of item 8.b—Default Fund Contributions to Central
Counterparties
Note: Item 8(b) only applies to holding companies that are clearing members, and
therefore will not be applicable to the vast majority of holding companies.
Holding companies must report the aggregate on-balance sheet amount of default
fund contributions to central counterparties (CCPs) in column A. Holding
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companies must report the aggregate off-balance sheet amount, if any, of default
fund contributions to central counterparties as a negative amount in column B of
item 8. Holding companies must report the aggregate on- and off-balance sheet
amount of such contributions in column R. See §.35(d) of the regulatory capital
rules for more details.
Clearing Member holding companies must report in column S the total amount of
risk-weighted assets (RWAs) for a clearing member holding company’s default
fund contributions to central counterparties. This will be the sum of:
o Component A: the sum of risk-weighted assets for a clearing member
holding company’s default fund contributions to all non-qualifying CCPs;
and,
o Component B: the sum of risk-weighted assets for a clearing member
holding company’s default fund contributions to all qualifying central
counterparties (QCCPs).
Report the sum of Components A and B in Schedule HC-R, Part II, item 8(b),
column S.
Component A: risk-weighted asset amount for default fund contributions to nonqualifying CCPs
As required by §.35(d)(2) of the regulatory capital rules, a clearing member
holding company’s risk-weighted asset amount for default fund contributions to
CCPs that are not QCCPs equals the sum of such default fund contributions
multiplied by 1,250 percent, or an amount determined by the holding company’s
federal supervisor based on factors such as size, structure and membership
characteristics of the CCP and riskiness of its transactions, in cases where such
default fund contributions may be unlimited. Therefore, unless otherwise advised
by its supervisor or through agency-issued guidance, a holding company will sum
each of its non-QCCP default fund contributions, and multiply the total by 1,250
percent, and add any additional risk-weighted asset amount determined by the
agency, if any. This will be Component A above.
Component B: risk-weighted asset amount for default fund contributions to
QCCPs
§.35(d)(3) of the regulatory capital rules provides two methods to determine the
capital requirement for a clearing member holding company’s default fund
contributions to a QCCP. A clearing member holding company may use either
method. A clearing member holding company’s risk-weighted asset amount for
default fund contributions to a QCCP equals the sum of its capital requirement,
KCM, for each QCCP as calculated under Method 1 multiplied by 1,250 percent,
or under Method 2.
Method 1: The holding company calculates the capital charge for a clearing
member in a 3-step process, depending on the funded status of the QCCP. The
process is summarized briefly below:
 Step 1: The holding company must calculate the hypothetical capital
requirement of all the trades conducted through the QCCP as if the QCCP
were a bank. This depends on the type of trade and netting sets with each

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



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counterparty. Alternately, the QCCP may provide this number to the clearing
member.
Step 2: The holding company compares the hypothetical capital requirement
(calculated in Step 1) to the funded default fund of the QCCP to include the
internally funded resources of the QCCP. This step determines the aggregate
capital requirement for all clearing members assuming a default of two
average clearing members.
Step 3: The aggregate capital requirement of all clearing members (assuming
the default of two members) is then allocated back to the individual clearing
member firm and converted to a risk-weighted asset amount.

Using the 3-step process and formulas provided in the regulatory capital rules, the
holding company will determine a dollar capital requirement for its default fund
contribution for each QCCP (KCMi). The holding company must then multiply
each KCMi by 1,250 percent to calculate the risk-weighted asset amount. The
holding company must sum the RWAs calculated for each QCCP default fund
contribution to produce a total RWA amount for all QCCP default fund
contributions for which the holding company uses this method. For example, the
total RWA amount for a holding company with default fund contributions to two
QCCPs will be the sum of KCMi for QCCP A and KCMi for QCCP B. This sum
will be included in Component B above for all QCCPs for which the holding
company uses method 1.
Method 2: Under Method 2, the risk weighted assets for a clearing member’s
default fund contribution is the minimum of:
 1,250 percent times the holding company's funded contributions to the
QCCP default fund, or,
 18 percent times the total trade exposures of the member to the QCCP.
A holding company will make this calculation for each QCCP for which it uses
Method 2. The sum of RWAs for all QCCP contributions for which the holding
company uses Method 2 will be included in Component B above.


9.

The portion of Schedule HC, items 6 through 11, that must be risk-weighted
according to the Country Risk Classification (CRC) methodology:
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include the portions of those
exposures described above in the instructions for Schedule HC-R, Part II, item
8 that are exposures on sovereigns or foreign banks that do not qualify as
securitization exposures.

On-balance sheet securitization exposures. When determining the amount of riskweighted assets for securitization exposures, holding companies that are not subject to
the market risk capital rule may elect to use either the Simplified Supervisory
Formula Approach (SSFA) or the Gross-Up Approach, as described above and in
§.41 to 45 of the regulatory capital rules. However, such holding companies must use
the SSFA or Gross-Up Approach consistently across all securitization exposures
(Schedule HC-R, Part II, items 9(a) through 10). Holding companies may risk weight
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any individual securitization exposure at 1,250 percent in lieu of applying the SSFA
or Gross-Up Approach to that individual exposure.
Holding companies subject to the market risk capital rule must use the SSFA when
determining the amount of risk-weighted assets for securitization exposures.
For further information, refer to the discussion of “Risk-Weighted Assets for
Securitization Exposures” in the General Instructions for Schedule HC-R, Part II.
9(a)

Held-to-maturity securities. Report in column A the amount of held-to-maturity
(HTM) securities reported in Schedule HC, item 2(a), that are securitization
exposures. Refer to the instructions for Schedule HC-R, Part II, item 2(a), for a
summary of the reporting locations of HTM securitization exposures.
Exposure amount to be used for purposes of risk weighting – holding company
cannot or has not made the Accumulated Other Comprehensive Income (AOCI) optout election in Schedule HC-R, Part I, item 3(a):
For a security classified as held-to-maturity where the holding company cannot or has
not made the AOCI opt-out election (i.e., most AOCI is included in regulatory
capital), the exposure amount to be risk weighted by the holding company is the
carrying value of the security, which is the value of the asset reported on the balance
sheet of the holding company determined in accordance with GAAP and in column
A.
Exposure amount to be used for purposes of risk weighting – holding company has
made the AOCI opt-out election in Schedule HC-R, Part I, item 3(a):
For a security classified as held-to-maturity where the holding company has made the
AOCI opt-out election (i.e., most AOCI is not included in regulatory capital), the
exposure amount to be risk weighted by the holding company is the carrying value of
the security reported on the balance sheet of the holding company and in column A,
less any net unrealized gains on the exposure, plus any net realized loss on the
exposure included in AOCI.


In column B
o If an HTM securitization exposure will be risk-weighted by using the 1,250
percent risk weight approach, report any difference between the carrying
value of the HTM securitization exposure reported in column A of this item
and the exposure amount of the HTM securitization exposure that is to be risk
weighted.
o If an HTM securitization exposure will be risk-weighted using either the
SSFA or the Gross-Up Approach, report the carrying value of the HTM
securitization exposure reported in column A of this item.



In column Q, report the exposure amount of those HTM securitization exposures
that are assigned a 1,250 percent risk weight (i.e., those HTM securitization
exposures for which the risk-weighted asset amount is not calculated using the
SSFA or the Gross-Up Approach).



In column T, report the risk-weighted asset amount (not the exposure amount) of
those HTM securitization exposures for which the risk-weighted asset amount is
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calculated using the SSFA, as described above in the General Instructions for Part
II and in §.41 to §.45 of the regulatory capital rules.


9(b)

In column U, report the risk-weighted asset amount (not the exposure amount) of
HTM securitization exposures for which the risk-weighted asset amount is
calculated using the Gross-Up Approach, as described above in the General
Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the regulatory
capital rules.

Available-for-sale securities. Report in column A the fair value of those availablefor-sale (AFS) securities reported in Schedule HC, item 2(b), that are securitization
exposures. Refer to the instructions for Schedule HC-R, Part II, item 2(b), for a
summary of the reporting locations of AFS securitization exposures.
Exposure amount to be used for purposes of risk weighting – holding company that
cannot or has not made the Accumulated Other Comprehensive Income (AOCI) optout election in Schedule HC-R, Part I, item 3(a):
For an AFS debt security that is a securitization exposure where the holding company
cannot make or has not made the AOCI opt-out election (i.e., most AOCI is included
in regulatory capital), the exposure amount of the AFS securitization exposure to be
risk weighted by the holding company is the carrying value of the debt security,
which is the value of the asset reported on the balance sheet of the holding company
(Schedule HC, item 2(b)) determined in accordance with GAAP (i.e., the fair value of
the available-for-sale debt security) and in column A of this item.
Exposure amount to be used for purposes of risk weighting – holding company has
made the AOCI opt-out election in Schedule HC-R, Part I, item 3(a):
For an AFS debt security that is a securitization exposure where the holding company
has made the AOCI opt-out election (i.e., most AOCI is not included in regulatory
capital), the exposure amount of the AFS securitization exposure to be risk weighted
by the holding company is the carrying value of the debt security, less any unrealized
gain on the exposure plus any unrealized loss on the exposure included in AOCI.


In column B
o If an AFS securitization exposure will be risk weighted using the 1,250
percent risk weight approach, a holding company that has made the AOCI
opt-out election should include the difference between the fair value and
amortized cost of those AFS debt securities that qualify as securitization
exposures. This difference equals the amounts reported in Schedule HC-B,
items 4 and 5, column D, minus items 4 and 5, column C, for those AFS debt
securities included in these items that are securitization exposures. When fair
value exceeds cost, report the difference as a positive number in Schedule
HC-R, Part II, item 9(b), column B. When cost exceeds fair value, report the
difference as a negative number (i.e., with a minus (-) sign) in Schedule HCR, Part II, item 9(b), column B.
o If an AFS securitization exposure will be risk weighted using either the SSFA
or the Gross-Up Approach, a holding company should report carrying value of
the AFS securitization exposure reported in column A of this item.

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

In column Q, report the exposure amount of those AFS securitization exposures
that are assigned a 1,250 percent risk weight (i.e., those AFS securitization
exposures for which the risk-weighted asset amount is not calculated using the
SSFA or the Gross-Up Approach).



In column T, report the risk-weighted asset amount (not the exposure amount) of
those AFS securitization exposures for which the risk-weighted asset amount is
calculated using the SSFA, as described above in the General Instructions for Part
II and in §.41 to 45 of the regulatory capital rules.



In column U, report the risk-weighted asset amount (not the exposure amount) of
those AFS securitization exposures for which the risk-weighted asset amount is
calculated using the Gross-Up Approach, as described above in the General
Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the regulatory
capital rules.

Example 1: A holding company reports an ADS securitization exposures on its
balance sheet in Schedule HC, item 2(b), at a carrying value (i.e., fair value) of $105.
The amortized cost of the AFS securitization exposure is $100. The AFS
securitization exposure has a $5 unrealized gain that is included in AOCI. The
holding company would report has made the AOCI opt-out election in Schedule HCR, Part I, item 3(a). The AFS securitization exposure will be risk weighted using the
1,250 percent risk weight approach. The holding company would report in Schedule
HC-R, Part II, item 9(b):
 $105 in Column A. This is the carrying value of the AFS securitization exposure
on the holding company’s balance sheet.
 $5 in Column B. This is the difference between the carrying value (i.e., fair value)
of the AFS securitization exposure and its exposure amount that is subject to riskweighting. For a holding company that has made the AOCI opt-out election,
column B will typically represent the amount of unrealized gain or unrealized loss
on a securitization exposure. Gains are reported as positive numbers; losses as
negative numbers. (Note: if the holding company has not made or cannot make
the AOCI opt-out election, there will not be an adjustment to be reported in
column B.)
 $100 is the exposure amount subject to risk-weighting. This amount will be
reported in item 9(b), column Q - 1,250 percent risk weight. For a holding
company that has made the AOCI opt-out election, the exposure amount typically
will be the carrying value (i.e., fair value) of the AFS securitization exposure
excluding any unrealized gain or loss.
Example 2: A holding company reports an AFS securitization exposure on its balance
sheet in Schedule HC, item 2(b), at a carrying value (i.e., fair value) of $105. The
AFS securitization exposure has a $5 unrealized gain that is included in AOCI. The
holding company has made the AOCI opt-out election in Schedule HC-R, Part I, item
3(a). The AFS securitization exposure will be risk weighted using the Gross-Up
Approach and it is assigned a 900 percent risk weight using this approach. The
holding company would report in Schedule HC-R, Part II, item 9(b):
 $105 in Column A. This is the carrying value of the AFS securitization exposure
on the holding company’s balance sheet.
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



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$105 in Column B. When the Gross-Up Approach is being used, the carrying
amount of the AFS securitization exposure on the holding company’s balance
sheet is to be reported in column B. Because the holding company has made the
AOCI opt-out election, the $105 carrying amount consists of two components: (i)
$100 is the exposure amount subject to risk-weighting at 900 percent, and (ii) $5
is difference between the carrying value and the exposure amount that is subject
to risk-weighting.
$900 reported in Column U. This is the risk-weighted asset amount of the AFS
securitization exposure. This amount ($900) will be reported in item 9(b), column
U - Gross-Up. (Note: $900 is the product of the $100 exposure amount multiplied
by a 900 percent risk weight.)

Trading assets. Report in column A the fair value of those trading assets reported in
Schedule HC, item 5, that are securitization exposures. Refer to the instructions for
Schedule HC-R, Part II, item 7, for a summary of the reporting locations of trading
assets that are securitization exposures.
If the holding company is subject to the market risk capital rule, report in column B
the fair value of those securitization exposures reported in column A of this item that
are covered positions as defined in Schedule HC-R, Part II, item 27. The holding
company will report its standardized market risk-weighted assets in Schedule HC-R,
Part II, item 27.
For holding companies not subject to the market risk capital rule and for those trading
assets held by holding companies subject to the market risk capital rule that are
securitization exposures that do not meet the definition of a covered position:


In column B, report the fair value reported in column A of this item for those
trading assets reported in Schedule HC, item 5, that qualify as securitization
exposures and will be risk-weighted using either the Simplified Supervisory
Formula Approach (SSFA) or the Gross-Up Approach.



In column Q, report the fair value of those trading assets that are securitization
exposures that are assigned a 1,250 percent risk weight (i.e., those trading asset
securitization exposures for which the risk-weighted asset amount is not
calculated using the SSFA or the Gross-Up Approach).



In column T, report the risk-weighted asset amount (not the fair value) of those
trading assets that are securitization exposures for which the risk-weighted asset
amount is calculated using the SSFA, as described above in the General
Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the regulatory
capital rules.



In column U, report the risk-weighted asset amount (not the fair value) of those
trading assets that are securitization exposures for which the risk-weighted asset
amount is calculated using the Gross-Up Approach, as described above in the
General Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the
regulatory capital rules.

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All other on-balance sheet securitization exposures. Report in column A the
amount of all on-balance sheet assets included in Schedule HC that qualify as
securitization exposures and are not reported in Schedule HC-R, Part II, items 9(a),
9(b), or 9(c). Refer to the instructions for Schedule HC-R, Part II, items 1, 3, 4, 5,
and 8, above for a summary of the reporting locations of other on-balance sheet
securitization exposures. For a holding company that has made the Accumulated
Other Comprehensive Income (AOCI) opt-out election in Schedule HC-R, Part I,
item 3(a), include in this item any accrued but uncollected interest and fees associated
with held-to-maturity, available-for-sale, and trading securitization exposures
reported in Schedule HC, item 11, “Other assets.”
Exposure amount to be used for purposes of risk weighting – holding company that
cannot or has not made the AOCI opt-out election in Schedule HC-R, Part I, item
3(a):
For other on-balance sheet securitization exposures where the holding company
cannot or has not made the AOCI opt-out election (i.e., most AOCI is included in
regulatory capital), the exposure amount to be risk weighted by the holding company
is the exposure’s carrying value, which is the value of the exposure reported on the
balance sheet of the holding company determined in accordance with GAAP and in
column A.
Exposure amount to be used for purposes of risk weighting – holding company has
made the AOCI opt out election in Schedule HC-R, Part I, item 3(a):
For other on-balance sheet securitization exposures where the holding company has
made the AOCI opt-out election (i.e., most AOCI is not included in regulatory
capital), the exposure amount to be risk weighted by the holding company is the
exposure’s carrying value, less any net unrealized gains on the exposure plus any net
realized loss on the exposure included in AOCI. In column B, report any difference
between the carrying value and the exposure amount of those other on-balance sheet
securitization exposures reported in column A of this item that will be risk weighted
by applying the 1,250 percent risk weight.


In column B, all holding companies should include the amount reported in column
A of this item for those other on-balance sheet securitization exposures that will
be risk-weighted using either the Simplified Supervisory Formula Approach
(SSFA) or the Gross-Up Approach.



In column Q, report the exposure amount of those other on-balance sheet
securitization exposures that are assigned a 1,250 percent risk weight (i.e., those
other on-balance sheet securitization exposures for which the risk-weighted asset
amount is not calculated using the SSFA or the Gross-Up Approach).



In column T, report the risk-weighted asset amount (not the exposure amount) of
those other on-balance sheet securitization exposures for which the risk-weighted
asset amount is calculated using the SSFA, as described above in the General
Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the regulatory
capital rules.



In column U, report the risk-weighted asset amount (not the exposure amount) of
those other on-balance sheet securitization exposures for which the risk-weighted
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asset amount is calculated using the Gross-Up Approach, as described above in
the General Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the
regulatory capital rules.
10

Off-balance sheet securitization exposures. Report in column A the notional
amount of all derivatives and off-balance sheet items reported in Schedule HC-L or
Schedule HC-S that qualify as securitization exposures. Refer to the instructions for
Schedule HC-R, Part II, items 12 through 21, for a summary of the reporting
locations of off-balance sheet securitization exposures.
Exposure amount to be used for purposes of risk weighting
For an off-balance sheet securitization exposure that is not a repo-style transaction or
eligible margin loan for which the holding company calculates an exposure amount
under §.37 of the regulatory capital rules, cleared transaction (other than a credit
derivative), or over-the-counter (OTC) derivative contract (other than a credit
derivative), the exposure amount is the notional amount of the exposure.
For an off-balance sheet securitization exposure to an asset-backed commercial paper
(ABCP) program, such as an eligible ABCP liquidity facility, the notional amount
may be reduced to the maximum potential amount that holding company could be
required to fund given the ABCP program’s current underlying assets (calculated
without regard to the current credit quality of those assets).
The exposure amount of an eligible ABCP liquidity facility for which the Simplified
Supervisory Formula Approach (SSFA) does not apply is equal to the notional
amount of the exposure multiplied by a credit conversion factor (CCF) of 50 percent.
The exposure amount of an eligible ABCP liquidity facility for which the SSFA
applies is equal to the notional amount of the exposure multiplied by a CCF of 100
percent.
For an off-balance sheet securitization exposure that is a repo-style transaction or
eligible margin loan for which the holding company calculates an exposure amount
under §.37 of the regulatory capital rules, a cleared transaction (other than a credit
derivative), or derivative contract (other than a credit derivative), the exposure
amount is the amount calculated under §.34, §.35, or §.37, as applicable, of the
regulatory capital rules.
For a credit-enhancing representation and warranty that is an off-balance sheet
securitization exposure, see the discussion of “Treatment of Sales of 1-4 Family
Residential First Mortgage Loans with Credit-Enhancing Representations and
Warranties,” which includes an example, in the General Instructions for Schedule
HC-R, Part II.


In column B, report the notional amount of those off-balance sheet securitization
exposures reported in column A of this item for which the exposure amount (as
described above) will be risk-weighted using either the SSFA or the Gross-Up
Approach. Also include in column B the difference between the notional amount
reported in column A of this and the exposure amount for those off-balance sheet

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items that qualify as securitization exposures and will be risk weighted by
applying the 1,250 percent risk weight.

11



In column Q, report the exposure amount of those off-balance sheet securitization
exposures that are assigned a 1,250 percent risk weight (i.e., those off-balance
sheet securitization exposures for which the risk-weighted asset amount is not
calculated using the SSFA or the Gross-Up Approach).



In column T, report the risk-weighted asset amount (not the exposure amount) of
those off-balance sheet securitization exposures for which the risk-weighted asset
amount is calculated using the SSFA, as described above in the General
Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the regulatory
capital rules.



In column U, report the risk-weighted asset amount (not the exposure amount) of
those off-balance sheet securitization exposures for which the risk-weighted asset
amount is calculated using the Gross-Up Approach, as described above in the
General Instructions for Schedule HC-R, Part II, and in §.41 to §.45 of the
regulatory capital rules.

Total assets. For columns A through R, report the sum of items 1 through 9. The
sum of columns B through R must equal column A. Schedule HC-R, Part II, item 11,
column A, must equal Schedule HC, item 12, “Total assets.”

Derivatives, Off-Balance Sheet Items, and Other Items Subject to Risk Weighting
(Excluding Securitization Exposures)
Treatment of Derivatives and Off-Balance Sheet Items that are Securitization Exposures - Any
derivatives or off-balance sheet items reported in Schedule HC-L or Schedule HC-S that qualify
as securitization exposures, including liquidity facilities to asset-back commercial paper
programs, are to be reported in Schedule HC-R, Part II, item 10, column A, and excluded from
Schedule HC-R, Part II, items 12 through 21 below.
Repo-style transactions – The regulatory capital rules permit some repo-style transactions to be
risk weighted on a netting set basis. Where netting is permitted, a holding company will combine
both on-balance and off-balance sheet repo-style transactions in order to determine a capital
requirement for a netting set to a single counterparty. In such cases, a holding company should
combine securities purchased under agreements to resell (i.e., reverse repos) and securities sold
under agreements to repurchase (i.e., repos) with off-balance sheet repo-style transactions (i.e.,
securities borrowing and securities lending transactions) in Schedule HC-R, Part II, item 16, and
report the netting set exposure to each counterparty under the appropriate risk weight column.
Item No. Caption and Instructions
12

Financial standby letters of credit. For financial standby letters of credit reported
in Schedule HC-L, item 2, that do not meet the definition of a securitization exposure
as described in §.2 of the regulatory capital rules, but are credit enhancements for
assets, report in column A:

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(1) The amount outstanding and unused of those letters of credit for which this
amount is less than the effective risk-based capital requirement for the assets that
are credit-enhanced by the letter of credit multiplied by 12.5.
(2) The full amount of the assets that are credit-enhanced by those letters of credit
that are not multiplied by 12.5.
For all other financial standby letters of credit reported in Schedule HC-L, item 2, that
do not meet the definition of a securitization exposure, report in column A the amount
outstanding and unused of these letters of credit.

13



In column B, report 100 percent of the amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of the portion
of financial standby letters of credit reported in Schedule HC-L, item 2, that are
secured by collateral or has a guarantee that qualifies for the zero percent risk
weight.



In column G–20% risk weight, include the credit equivalent amount of the portion
of financial standby letters of credit reported in Schedule HC-L, item 2, that has
been conveyed to U.S. depository institutions. Also include the credit equivalent
amount of the portion of financial standby letters of credit reported in Schedule
HC-L, item 2, that are secured by collateral or has a guarantee that qualifies for
the 20 percent risk weight.



In column H–50% risk weight, include the credit equivalent amount of the portion
of financial standby letters of credit reported in Schedule HC-L, item 2, that are
secured by collateral or has a guarantee that qualifies for the 50 percent risk
weight.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H and J. Also
include the credit equivalent amount of the portion of financial standby letters of
credit reported in Schedule HC-L, item 2, that are secured by collateral or has a
guarantee that qualifies for the 100 percent risk weight.



Financial standby letters of credit that must be risk-weighted according to the
Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of the portion of financial standby letters of
credit reported in Schedule HC-L, item 2, that have been conveyed to foreign
banks.

Performance standby letters of credit and transaction-related contingent items.
Report in column A transaction-related contingent items, which includes the face amount
of performance standby letters of credit reported in Schedule HC-L, item 3, and any other
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transaction-related contingent items that do not meet the definition of a securitization
exposure as described in §.2 of the regulatory capital rules.


In column B, report 50 percent of the face amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of the portion
of performance standby letters of credit and transaction-related contingent items
reported in Schedule HC-L, item 3, that are secured by collateral or has a
guarantee that qualifies for the zero percent risk weight.



In column G–20% risk weight, include the credit equivalent amount of the portion
of performance standby letters of credit, performance bids, bid bonds, and
warranties reported in Schedule HC-L, item 3, that have been conveyed to U.S.
depository institutions. Also include the credit equivalent amount of the portion
of performance standby letters of credit and transaction-related contingent items
reported in Schedule HC-L, item 3, that are secured by collateral or has a
guarantee that qualifies for the 20 percent risk weight.



In column H–50% risk weight, include the credit equivalent amount of the portion
of performance standby letters of credit and transaction-related contingent items
reported in Schedule HC-L, item 3, that are secured by collateral or has a
guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H and J. Also
include the credit equivalent amount of the portion of performance standby letters
of credit and transaction-related contingent items reported in Schedule HC-L,
item 3, that are secured by collateral or has a guarantee that qualifies for the 100
percent risk weight.



Performance standby letters of credit and transaction-related contingent items that
must be risk-weighted according to the Country Risk Classification (CRC)
methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of the portion of performance standby letters of
credit, performance bids, bid bonds, and warranties reported in Schedule HCL, item 3, that have been conveyed to foreign banks.
14

Commercial and similar letters of credit with an original maturity of one year or
less. Report in column A the face amount of those commercial and similar letters of
credit, including self-liquidating, trade-related contingent items that arise from the
movement of goods, reported in Schedule HC-L, item 4, with an original maturity of
one year or less that do not meet the definition of a securitization exposure as
described in §.2 of the regulatory capital rules. Report those commercial letters of
credit with an original maturity exceeding one year that do not meet the definition of
a securitization exposure in Schedule HC-R, Part II, item 18(c).
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

In column B, report 20 percent of the face amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of the portion
of commercial or similar letters of credit with an original maturity of one year or
less reported in Schedule HC-L, item 4, that are secured by collateral or has a
guarantee that qualifies for the zero percent risk weight.



In column G–20% risk weight, include the credit equivalent amount of the portion
of commercial and similar letters of credit, including self-liquidating, traderelated contingent items that arise from the movement of goods, with an original
maturity of one year or less, reported in Schedule HC-L, item 4, that have been
conveyed to U.S. depository institutions. Also include the credit equivalent
amount of the portion of commercial or similar letters of credit with an original
maturity of one year or less reported in Schedule HC-L, item 4, that are secured
by collateral or has a guarantee that qualifies for the 20 percent risk weight.



In column H–50% risk weight, include the credit equivalent amount of the portion
of commercial or similar letters of credit with an original maturity of one year or
less reported in Schedule HC-L, item 4, that are secured by collateral or has a
guarantee that qualifies for the 50 percent risk weight.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H and J. Also
include the credit equivalent amount of the portion of commercial or similar
letters of credit with an original maturity of one year or less reported in Schedule
HC-L, item 4, that are secured by collateral or has a guarantee that qualifies for
the 100 percent risk weight.



Commercial and similar letters of credit that must be risk-weighted according to
the Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of commercial and similar letters of credit,
including self-liquidating, trade-related contingent items that arise from the
movement of goods, with an original maturity of one year or less, reported in
Schedule HC-L, item 4, that have been conveyed to foreign banks.

Retained recourse on small business obligations sold with recourse. Report in
column A the amount of retained recourse on small business obligations reported in
Schedule HC-S, Memorandum item 1(b), that do not meet the definition of a
securitization exposure as described in §.2 of the regulatory capital rules.
For retained recourse on small business obligations sold with recourse that qualify as
securitization exposures, please see §42(h) of the regulatory capital rule for purposes
of risk-weighting and report these exposures in Schedule HC-R, Part II, item 10.
Under Section 208 of the Riegle Community Development and Regulatory
Improvement Act of 1994, a "qualifying institution" that transfers small business
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loans and leases on personal property (small business obligations) with recourse in a
transaction that qualifies as a sale under generally accepted accounting principles
(GAAP) must maintain risk-based capital only against the amount of recourse
retained, provided the institution establishes a recourse liability account that is
sufficient under GAAP. Only loans and leases to businesses that meet the criteria for
a small business concern established by the Small Business Administration under
Section 3(c) of the Small Business Act (12 U.S.C.631) are eligible for this favorable
risk-based capital treatment.
In general, a "qualifying institution" is one that is well capitalized without regard to
the Section 208 provisions. If a holding company ceases to be a qualifying institution
or exceeds the retained recourse limit set forth in banking agency regulations
implementing Section 208, all new transfers of small business obligations with
recourse would not be treated as sales. However, the reporting and risk-based capital
treatment described above will continue to apply to any transfers of small business
obligations with recourse that were consummated during the time the holding
company was a "qualifying institution" and did not exceed the limit.

16



In column B, report 100 percent of the amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of the portion
of retained recourse on small business obligations sold with recourse reported in
Schedule HC-S, Memorandum item 1(b), that are secured by collateral or has a
guarantee that qualifies for the zero percent risk weight.



In column G–20% risk weight, include the credit equivalent amount of the portion
of retained recourse on small business obligations sold with recourse reported in
Schedule HC-S, Memorandum item 1(b), that are secured by collateral or has a
guarantee that qualifies for the 20 percent risk weight.



In column H–50% risk weight, include the credit equivalent amount of the portion
of retained recourse on small business obligations sold with recourse reported in
Schedule HC-S, Memorandum item 1(b), that are secured by collateral or has a
guarantee that qualifies for the 50 percent risk weight.



In column I-100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H and J. Also
include the credit equivalent amount of the portion of retained recourse on small
business obligations sold with recourse reported in Schedule HC-S, Memorandum
item 1(b), that are secured by collateral or has a guarantee that qualifies for the
100 percent risk weight.

Repo-style transactions. Repo-style transactions include:


Securities lending transactions, including transactions in which the holding
company acts as an agent for a customer and indemnifies the customer against
loss. Securities lent are reported in Schedule HC L, item 6(a).



Securities borrowing transactions Securities borrowed are reported in Schedule
HC-L, item 6(b).
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

Securities purchased under agreements to resell (i.e., reverse repos). Securities
purchased under agreements to resell are reported in Schedule HC, item 3(b).



Securities sold under agreements to repurchase (i.e., repos). Securities sold under
agreements to repurchase are reported in Schedule HC, item 14(b).18

Report in column A the exposure amount of repo-style transactions that do not meet
the definition of a securitization exposure as described in §.2 of the regulatory capital
rules.
For repo-style transactions to which the holding company applies the Simple
Approach to recognize the risk-mitigating effects of qualifying financial collateral, as
outlined in §.37 of the regulatory capital rules, the exposure amount to be reported in
column A is the sum of the fair value as of the report date of securities the holding
company has lent,19 the amount of cash or the fair value as of the report date of other
collateral the holding company has posted for securities borrowed, the amount of cash
provided to the counterparty for securities purchased under agreements to resell (as
reported in Schedule RC, item 3.b), and the fair value as of the report date of
securities sold under agreements to repurchase.
For repo-style transactions to which the holding company applies the Collateral
Haircut Approach to recognize the risk-mitigating effects of qualifying financial
collateral, as outlined in §.37 of the regulatory capital rules, the exposure amount to
be reported in column A for a repo-style transaction or a single-product netting set of
such transactions is determined by using the exposure amount equation in §.37(c) of
the regulatory capital rules.
A holding company may apply either the Simple Approach or the Collateral Haircut
Approach to repo-style transactions; however, the holding company must use the
same approach for similar exposures or transactions. For further information, see the
discussion of “Treatment of Collateral and Guarantees” in the General Instructions
for Schedule HC-R, Part II.


In column B, report 100 percent of the exposure amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of repo-style
transactions that are supported by the appropriate amount of collateral that
qualifies for the zero percent risk weight under the regulatory capital rules (refer
to §.37 of the regulatory capital rules).

18

Although securities purchased under agreements to resell and securities sold under agreements to repurchase are
reported on the balance sheet (Schedule HC) as assets and liabilities, respectively, they are included with securities
lent and securities borrowed and designated as repo-style transactions that are treated collectively as off-balance
sheet items under the regulatory capital rules.
19

For held-to-maturity securities that have been lent, the amortized cost of these securities is reported in Schedule
HC-L, item 6(a), but the fair value of these securities should be reported as the exposure amount in column A of this
item.
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

In column D–2% risk weight, include the credit equivalent amount of centrally
cleared repo-style transactions with Qualified Central Counterparties (QCCPs), as
defined in §.2 and described in §.35 of the regulatory capital rules.



In column E–4% risk weight, include the credit equivalent amount of centrally
cleared repo-style transactions with QCCPs in all other cases that do not meet the
criteria of qualification for a 2 percent risk weight, as described in §.35 of the
regulatory capital rules.



In column G–20% risk weight, include the credit equivalent amount of repo-style
transactions that are supported by the appropriate amount of collateral that
qualifies for the 20 percent risk weight under the regulatory capital rules. Also
include the credit equivalent amount of repo-style transactions that represents
exposures to U.S. depository institutions.



In column H–50% risk weight, include the credit equivalent amount of repo-style
transactions that are supported by the appropriate amount of collateral that
qualifies for the 50 percent risk weight under the regulatory capital rules.



In column I-100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H, J, and R. Also
include the credit equivalent amount of repo-style transactions that are supported
by the appropriate amount of collateral that qualifies for the 100 percent risk
weight under the regulatory capital rules.



In column J–150% risk weight, include the credit equivalent amount of repo-style
transactions that are supported by the appropriate amount of collateral that
qualifies for the 150 percent risk weight under the regulatory capital rules.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of repo-style transactions that is secured by qualifying financial collateral
that meets the definition of a securitization exposure in §.2 of the regulatory
capital rules or is a mutual fund only if the holding company chooses to recognize
the risk-mitigating effects of the securitization exposure collateral under the
simple approach or the collateral haircut approach outlined in §.37 of the
regulatory capital rules. Under the simple approach, the risk weight assigned to
the collateralized portion of the repo-style exposure may not be less than 20
percent.
o Include in column R the portion of repo-style transactions secured by the fair
value or adjusted fair value of securitization exposure or mutual fund
collateral as determined under the simple approach or the collateral haircut
approach, respectively; however, the holding company must apply the same
approach for all repo-style transactions. In addition, if the holding company
applies the simple approach, it must apply the same approach – either the
Simplified Supervisory Formula Approach or the Gross-Up Approach – that it
applies to determine the risk-weighted asset amounts of its on- and offbalance sheet securitization exposures that are reported in Schedule HC-R,
Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of repo-style
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transactions secured by such collateral. Any remaining portion of the repostyle exposure that is uncollateralized or collateralized by other qualifying
collateral would be reported in columns C through J, as appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the General
Instructions for Schedule HC-R, Part II.


Repo-style transactions that must be risk-weighted according to the Country Risk
Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of repo-style transactions that represents
exposures to foreign central banks and foreign banks.
Examples: Reporting Securities Sold Under Agreements to Repurchase (Repos)
Under the Simple Approach for Recognizing Effects of Collateral
§.37 of the regulatory capital rules provides for the recognition of the risk-mitigating
effects of collateral when risk-weighting assets collateralized by financial collateral,
as defined in §.2. The following examples illustrate the calculation of risk-weighted
assets and the reporting of securities sold under agreements to repurchase (repos) in
Schedule HC-R, Part II, item 16, using the Simple Approach.
Example 1: Security sold under agreement to repurchase fully collateralized by
cash.
A holding company has transferred an available-for-sale (AFS) debt security to a
counterparty in a repo transaction that is accounted for as secured borrowing on the
bank’s balance sheet. The bank received $100 in cash from the repo counterparty in
this transaction. The amortized cost and the fair value of the AFS debt security are
both $100 as of the report date.20 The debt security is an exposure to a U.S.
government sponsored entity (GSE) that qualifies for a 20 percent risk weight. The
repo counterparty is a company that would receive a 100 percent risk weight.
Calculation of risk-weighted assets for the transaction:
1. The holding company continues to report the AFS GSE debt security as an asset
on its balance sheet and to risk weight the security as an on-balance sheet asset at
20 percent:21
a. $100 x 20% = $20

20

In both Example 1 and Example 2, because the fair value carrying value of the AFS GSE debt security equals the
amortized cost of the debt security, a holding company that has made the AOCI opt-out election in Schedule HC-R,
Part I, item 3(a), does not need to adjust the carrying value (i.e., the fair value) of the debt security to determine the
exposure amount of the security. Thus, for a holding company that has made the AOCI opt-out election, the
carrying value of the AFS debt security equals its exposure amount in Examples 1 and 2.
21

See footnote 21.
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2. The holding company has a $100 exposure to the repo counterparty (the report
date fair value of the security transferred to the counterparty) that is collateralized
by the $100 of cash received from the counterparty. The holding company risk
weights its exposure to the repo counterparty at zero percent in recognition of the
cash received in the transaction from the counterparty: $100 x 0% = $0
3. There is no additional exposure to the repo counterparty to risk weight because
the exposure to the counterparty is fully collateralized by the cash received.
Total risk-weighted assets arising from the transactions: $20
The holding company would report the transaction as follows:
1. The holding company reports the AFS debt security in Schedule HC-R, Part II,
item 2(b):
a. The $100 carrying value (i.e., fair value) of the AFS debt security on the
balance sheet will be reported in column A.22
b. The $100 credit equivalent amount of the holding company’s exposure
amount of the AFS debt security will be reported in column G – 20
percent risk weight (which is the applicable risk weight for a U.S. GSE
debt security).
2. The holding company reports the repurchase agreement in Schedule HC-R, Part
II, item 16:
a. The holding company’s $100 exposure to the repo counterparty, which is
the fair value of the debt security transferred in the repo transaction, is the
exposure amount to be reported in column A.
b. The $100 credit equivalent amount of the holding company’s exposure to
the repo counterparty will be reported in column B.
c. Because the holding company’s exposure to the repo counterparty is fully
collateralized by the $100 of cash received from the counterparty, the
$100 credit equivalent amount of the repurchase agreement will be
reported in column C – 0 percent risk weight (which is the applicable risk
weight for cash collateral).

2(b).

16.

AFS Securities

(Column A)
Totals from
Schedule RC
$100

Repo-style Transactions

(Column A)
Face or
notional
$100

(Column B)
Adjustments

(Column B)
Credit Equiv.
$100

(Column C)
(Column G)
(Column I)
Allocation by Risk-Weight Category
0%
20%
100%
$100

2(b).

(Column C)
(Column G)
(Column I)
Allocation by Risk-Weight Category
0%
20%
100%
$100

16.

Example 2: Security sold under an agreement to repurchase (repo) not fully
collateralized by cash.
A holding company has transferred an AFS debt security to a counterparty in a repo
transaction that is accounted for as a secured borrowing on the bank’s balance sheet.
The holding company received $98 in cash from the repo counterparty in this
transaction. The amortized cost and the fair value of the AFS debt security are both
$100 as of the report date.23 The debt security is an exposure to a U.S. GSE that
22
23

See footnote 21.
See footnote 21.
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qualifies for a 20 percent risk weight. The repo counterparty is a company that would
receive a 100 percent risk weight.
Calculation of risk-weighted assets for the transaction:
1. The bank continues to report the AFS GSE debt security as an asset on its balance
sheet and to risk weight the security as an on-balance sheet asset at 20 percent:24
$100 x 20% = $20
2. The holding company has a $100 exposure to the repo counterparty (the report
date fair value of the security transferred to the counterparty) of which $98 is
collateralized by the cash received from the counterparty. The holding company
risk weights the portion of its exposure to the repo counterparty that is
collateralized by the cash received from the counterparty at zero percent: $98 x
0% = $0
3. The holding company risk weights its $2 uncollateralized exposure to the repo
counterparty using the risk weight applicable to the counterparty: $2 x 100% = $2
Total risk-weighted assets for the above transactions: $22
The holding company would report the transaction in Schedule HC-R, Part II, as
follows:
1. The holding reports the AFS debt security in item 2(b):
a. The $100 carrying value (i.e., the fair value) of the AFS debt security on the
balance sheet will be reported in column A.25
b. The $100 exposure amount of the AFS debt security will be reported in
column G–20% risk weight (which is the applicable risk weight for a U.S.
GSE debt security).
2. The holding company reports the repurchase agreement in item 16:
a. The holding company’s $100 exposure to the repo counterparty, which is the
fair value of the debt security transferred in the repo transaction, is the
exposure amount to be reported in column A.
b. The $100 credit equivalent amount of the holding company’s exposure to the
repo counterparty will be reported in column B.
c. Because the holding company’s exposure to the repo counterparty is
collateralized by the $98 of cash received from the counterparty, $98 of the
$100 credit equivalent amount of the repurchase agreement will be reported in
column C–0% risk weight (which is the applicable risk weight for cash
collateral).
d. The $2 uncollateralized exposure to the repo counterparty will be reported in
column I–100% risk weight (which is the applicable risk weight for the repo
counterparty).
(Column A)
Totals from
Schedule RC

24
25

(Column B)
Adjustments

(Column C)
(Column G)
(Column I)
Allocation by Risk-Weight Category
0%
20%
100%

See footnote 21.
See footnote 21.
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2(b).

16.

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AFS Securities

Repo-style Transactions

$100
(Column A)
Face or
notional
$100

HC-R – REGULATORY CAPITAL
03/02/2015

$100

(Column B)
Credit Equiv.
$100

2(b).

(Column C)
(Column G)
(Column I)
Allocation by Risk-Weight Category
0%
20%
100%
$98
$2

16.

All other off-balance sheet liabilities. Report in column A:
 The notional amount of all other off-balance sheet liabilities reported in Schedule
HC-L, item 9, that are covered by the regulatory capital rules,
 The face amount of risk participations in bankers acceptances that have been
acquired by the reporting institution and are outstanding,
 The full amount of loans sold with credit-enhancing representations and
warranties that do not meet the definition of a securitization exposure as described
in §.2 of the regulatory capital rules,
 The notional amount of written option contracts that act as financial guarantees
that do not meet the definition of a securitization exposure as described in §.2 of
the regulatory capital rules, and
 The notional amount of all forward agreements, which are defined as legally
binding contractual obligations to purchase assets with certain drawdown at a
specified future date, not including commitments to make residential mortgage
loans or forward foreign exchange contracts.
However, exclude from column A:
 The amount of credit derivatives classified as trading assets that are subject to the
market risk capital rule (report in Schedule HC-R, Part II, items 20 and 21, as
appropriate), and
 Credit derivatives purchased by the holding company that are recognized as
guarantees of an asset or off-balance sheet exposure under the regulatory capital
rules, i.e., credit derivatives on which the holding company is the beneficiary
(report the guaranteed asset or exposure in Schedule HC-R, Part II, in the
appropriate balance sheet or off-balance sheet category – e.g., item 5, “Loans and
leases, net of unearned income” – and in the risk weight category applicable to the
derivative counterparty – e.g., column G – 20% risk weight – rather than the risk
weight category applicable to the obligor of the guaranteed asset).


In column B, report 100 percent of the face amount, notional amount, or other
amount reported in column A.



In column C–0% risk weight, include the credit equivalent amount of liabilities to
counterparties who meet, or that have guarantees or collateral that meets, the
criteria for the zero percent risk weight category as described in the instructions
for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1 through 8,
above.



In column G–20% risk weight, include the credit equivalent amount of liabilities
to counterparties who meet, or that have guarantees or collateral that meets, the
criteria for the 20 percent risk weight category as described in the instructions for
Risk-Weighted Assets and for Schedule HC-R, Part II, items 1 through 8, above.
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

In column H–50% risk weight, include the credit equivalent amount of liabilities
to counterparties who meet, or that have guarantees or collateral that meets, the
criteria for the 50 percent risk weight category as described in the instructions for
Risk-Weighted Assets and for Schedule HC-R, Part II, items 1 through 8, above.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through J. Include the
credit equivalent amount of liabilities to counterparties who meet, or that have
guarantees or collateral that meets, the criteria for the 100 percent risk weight
category as described in the instructions for Risk-Weighted Assets and for
Schedule HC-R, Part II, items 1 through 8, above.



In column J–150% risk weight, include the credit equivalent amount of liabilities
to counterparties who meet, or that have guarantees or collateral that meets, the
criteria for the 150 percent risk weight category as described in the instructions
for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1 through 8,
above.



All other off-balance sheet liabilities that must be risk-weighted according to the
Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of those other off-balance sheet liabilities
described above in the instructions for Column A of this item that represent
exposures to foreign central banks and foreign banks.

Unused commitments. Report in items 18(a) and 18(c) the amounts of unused
commitments, excluding those that are unconditionally cancelable, which are to be
reported in Schedule HC-R, Part II, item 19. Where a holding company provides a
commitment structured as a syndication or participation, the holding company is only
required to calculate the exposure amount for its pro rata share of the commitment.
Exclude from items 18(a) and 18(c) any unused commitments that qualify as
securitization exposures, as defined in §.2 of the regulatory capital rules. Unused
commitments that are securitization exposures must be reported in Schedule HC-R,
Part II, item 10, column A. Also exclude default fund contributions in the form of
commitments made by a clearing member to a central counterparty’s mutualized loss
sharing arrangement. Such default fund contributions must be reported (as a negative
number) in Schedule HC-R, Part II, item 8, column B.

18(a)

Original maturity of one year or less, excluding asset-backed commercial paper
(ABCP) conduits. Report in column A the unused portion of those unused
commitments reported in Schedule HC-L, item 1, with an original maturity of one
year or less, excluding unused commitments to asset-backed commercial paper
(ABCP) conduits, that are subject to the regulatory capital rules.

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Under the regulatory capital rules, the unused portion of commitments (facilities) that
are unconditionally cancelable (without cause) at any time by the holding company
have a zero percent credit conversion factor. The unused portion of such
unconditionally cancelable commitments should be excluded from this item and
reported in Schedule HC-R, Part II, item 19. For further information, see the
instructions for item 19.
"Original maturity" is defined as the length of time between the date a commitment is
issued and the date of maturity, or the earliest date on which the holding company (1)
is scheduled to (and as a normal practice actually does) review the facility to
determine whether or not it should be extended and (2) can unconditionally cancel the
commitment.


In column B, report 20 percent of the amount of unused commitments reported in
column A.



In column C–0% risk weight, include the credit equivalent amount of unused
commitments to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the zero percent risk weight category as described in
the instructions for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1
through 8, above.



In column G–20% risk weight, include the credit equivalent amount of unused
commitments to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the 20 percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1
through 8, above.

•

In column H–50% risk weight, include the credit equivalent amount of unused
commitments to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the 50 percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1
through 8, above.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H, J, and R.
Include the credit equivalent amount of unused commitments to counterparties
who meet, or that have guarantees or collateral that meets, the criteria for the 100
percent risk weight category as described in the instructions for Risk-Weighted
Assets and for Schedule HC-R, Part II, items 1 through 8, above.



In column J–150% risk weight, include the credit equivalent amount of unused
commitments to counterparties who meet, or that have guarantees or collateral
that meets, the criteria for the 150 percent risk weight category as described in the
instructions for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1
through 8, above.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of unused commitments that is secured by qualifying financial collateral
that meets the definition of a securitization exposure in §.2 of the regulatory
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capital rules or is a mutual fund only if the holding company chooses to recognize
the risk-mitigating effects of the securitization exposure or mutual fund collateral
under the simple approach outlined in §.37 of the regulatory capital rules. Under
the simple approach, the risk weight assigned to the collateralized portion of an
unused commitment may not be less than 20 percent.
o Include in column R the portion of unused commitments secured by the fair
value of securitization exposure or mutual fund collateral as determined under
the simple approach. In addition, the holding company must apply the same
approach to securitization exposure collateral – either the Simplified
Supervisory Formula Approach or the Gross-Up Approach – that it applies to
determine the risk-weighted asset amounts of its on- and off-balance sheet
securitization exposures that are reported in Schedule HC-R, Part II, items 9
and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of unused
commitments secured by such collateral. Any remaining portion of the
unused commitment that is uncollateralized or collateralized by other
qualifying collateral would be reported in columns C through J, as
appropriate.
For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the General
Instructions for Schedule HC-R, Part II.
 Unused commitments with an original maturity of one year or less, excluding
ABCP conduits, that must be risk weighted according to the Country Risk
Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of those unused commitments described above
in the instructions for Column A of this item that represent exposures to
foreign banks.
18(b)

Original maturity of one year or less to ABCP conduits. Do not report amounts in
Schedule HC-R, Part II, item 18(b). Eligible asset-backed commercial paper (ABCP)
liquidity facilities with an original maturity of one year or less are off-balance sheet
securitization exposures and should be reported in Schedule HC-R, Part II, item 10.

18(c)

Original maturity exceeding one year. Report in column A the unused portion of
those commitments to make or purchase extensions of credit in the form of loans or
participations in loans, lease financing receivables, or similar transactions reported in
Schedule HC-L, item 1, that have an original maturity exceeding one year and are
subject to the regulatory capital rules. Also report in column A the face amount of
those commercial and similar letters of credit reported in Schedule HC-L, item 4,
with an original maturity exceeding one year that do not meet the definition of a
securitization exposure as described in §.2 of the regulatory capital rules.
Under the regulatory capital rules, the unused portion of commitments (facilities)
which are unconditionally cancelable (without cause) at any time by the holding
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company (to the extent permitted under applicable law) have a zero percent credit
conversion factor. The unused portion of such unconditionally cancelable
commitments should be excluded from this item and reported in Schedule HC-R, Part
II, item 19. For further information, see the instructions for item 19.
Also include in column A the unused portion all revolving underwriting facilities
(RUFs) and note issuance facilities (NIFs), regardless of maturity.
In the case of consumer home equity or mortgage lines of credit secured by liens on
1-4 family residential properties, a holding company is deemed able to
unconditionally cancel the commitment if, at its option, it can prohibit additional
extensions of credit, reduce the credit line, and terminate the commitment to the full
extent permitted by relevant federal law. Retail credit cards and related plans,
including overdraft checking plans and overdraft protection programs, are defined to
be short-term commitments that should be converted at zero percent and excluded
from this item 18(c) if the holding company has the unconditional right to cancel the
line of credit at any time in accordance with applicable law.
For commitments providing for increases in the dollar amount of the commitment, the
amount to be converted to an on-balance sheet credit equivalent amount and risk
weighted is the maximum dollar amount that the holding company is obligated to
advance at any time during the life of the commitment. This includes seasonal
commitments where the dollar amount of the commitment increases during the
customer's peak business period. In addition, this risk-based capital treatment applies
to long-term commitments that contain short-term options which, for a fee, allow the
customer to increase the dollar amount of the commitment. Until the short-term
option has expired, the reporting holding company must convert and risk weight the
amount which it is obligated to lend if the option is exercised. After the expiration of
a short-term option which has not been exercised, the unused portion of the original
amount of the commitment is to be used in the credit conversion process.


In column B, report 50 percent of the amount of unused commitments and the face
amount of commercial and similar letters of credit reported in column A. Note
that unused commitments that qualify as securitization exposures as defined in §.2
of the regulatory capital rules should be reported as securitization exposures in
Schedule HC-R, Part II, item 10.



In column C–0% risk weight, include the credit equivalent amount of unused
commitments and commercial and similar letters of credit to counterparties who
meet, or that have guarantees or collateral that meets, the criteria for the zero
percent risk weight category as described in the instructions for Risk-Weighted
Assets and for Schedule HC-R, Part II, items 1 through 8, above.



In column G–20% risk weight, include the credit equivalent amount of unused
commitments and commercial and similar letters of credit to counterparties who
meet, or that have guarantees or collateral that meets, the criteria for the 20
percent risk weight category as described in the instructions for Risk-Weighted
Assets and for Schedule HC-R, Part II, items 1 through 8, above. Include the
credit equivalent amount of commitments that have been conveyed to U.S.
depository institutions. Include the credit equivalent amount of those commercial
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and similar letters of credit reported in Schedule HC-L, item 4, with an original
maturity exceeding one year that have been conveyed to U.S. depository
institutions.


In column H–50% risk weight, include the credit equivalent amount of unused
commitments and commercial and similar letters of credit to counterparties who
meet, or that have guarantees or collateral that meets, the criteria for the 50
percent risk weight category as described in the instructions for Risk-Weighted
Assets and for Schedule HC-R, Part II, items 1 through 8, above.



In column I–100% risk weight, include the portion of the credit equivalent amount
reported in column B that is not included in columns C through H, J, and R. Also
include the credit equivalent amount of unused commitments and commercial and
similar letters of credit to counterparties who meet, or that have guarantees or
collateral that meets, the criteria for the 100 percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above.



In column J–150% risk weight, include the credit equivalent amount of unused
commitments and commercial and similar letters of credit to counterparties who
meet, or that have guarantees or collateral that meets, the criteria for the 150
percent risk weight category as described in the instructions for Risk-Weighted
Assets and for Schedule HC-R, Part II, items 1 through 8, above.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of unused commitments that is secured by qualifying financial collateral
that meets the definition of a securitization exposure in §.2 of the regulatory
capital rules or is a mutual fund only if the holding company chooses to recognize
the risk-mitigating effects of the securitization exposure or mutual fund collateral
under the simple approach outlined in §.37 of the regulatory capital rules. Under
the simple approach, the risk weight assigned to the collateralized portion of an
unused commitment may not be less than 20 percent.
o Include in column R the portion of unused commitments secured by the fair
value of securitization exposure or mutual fund collateral as determined under
the simple approach. In addition, the holding company must apply the same
approach to securitization exposure collateral – either the Simplified
Supervisory Formula Approach or the Gross-Up Approach – that it applies to
determine the risk-weighted asset amounts of its on- and off-balance sheet
securitization exposures that are reported in Schedule HC-R, Part II, items 9
and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of unused
commitments secured by such collateral. Any remaining portion of the
unused commitment that is uncollateralized or collateralized by other
qualifying collateral would be reported in columns C through J, as
appropriate.

For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the General
Instructions for Schedule HC-R, Part II.
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

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Unused commitments and commercial and similar letters of credit with an
original maturity exceeding one year that must be risk-weighted according to the
Country Risk Classification (CRC) methodology
o In column C–0% risk weight; column G–20% risk weight; column H–50% risk
weight; column I–100% risk weight; column J–150% risk weight. Assign these
exposures to risk weight categories based on the CRC methodology described
above in the General Instructions for Part II. Include:
o The credit equivalent amount of those unused commitments described above
in the instructions for Column A of this item that represent exposures to
foreign banks.
o The credit equivalent amount of those commercial and similar letters of credit
reported in Schedule HC-L, item 4, with an original maturity exceeding one
year that have been conveyed to foreign banks.

Unconditionally cancelable commitments. Report in column A the unused portion
of those unconditionally cancelable commitments reported in Schedule HC-L, item 1,
that are subject to the regulatory capital rules.
In the case of consumer home equity or mortgage lines of credit secured by liens on
1-4 family residential properties, a holding company is deemed able to
unconditionally cancel the commitment if, at its option, it can prohibit additional
extensions of credit, reduce the credit line, and terminate the commitment to the full
extent permitted by relevant federal law. Retail credit cards and related plans,
including overdraft checking plans and overdraft protection programs, are defined to
be short-term commitments that should be converted at zero percent and included in
this item if the holding company has the unconditional right to cancel the line of
credit at any time in accordance with applicable law.
The unused portion of commitments (facilities) that are unconditionally cancelable
(without cause) at any time by the holding company (to the extent permitted by
applicable law) have a zero percent credit conversion factor. The unused portion of
such commitments should be reported in this item in column A.

20

Over-the-counter derivatives. Report in column B the credit equivalent amount of
over-the-counter (OTC) derivative contracts covered by the regulatory capital rules.
Include OTC credit derivative contracts held for trading purposes and subject to the
market risk capital rule. Do not include centrally cleared derivative contracts. Do not
include OTC derivative contracts that meet the definition of a securitization exposure
as described in §.2 of the regulatory capital rules; such derivative contracts must be
reported in Schedule HC-R, Part II, item 10.
The credit equivalent amount of an OTC derivative contract to be reported in Column
B is the sum of its current credit exposure (as reported in Schedule HC-R, Part II,
Memorandum item 1) plus the potential future exposure over the remaining life of the
derivative contract (regardless of its current credit exposure, if any), as described in
§.34 of the regulatory capital rules. The current credit exposure of a derivative
contract is (1) the fair value of the contract when that fair value is positive and (2)
zero when the fair value of the contract is negative or zero. The potential future
credit exposure of a contract, which is based on the type of contract and the contract's
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remaining maturity, is determined by multiplying the notional principal amount of the
contract by the appropriate credit conversion factor from the following chart. The
notional principal amounts of the reporting holding company’s OTC derivatives that
are subject to the risk-based capital requirements are reported by remaining maturity
in Schedule HC-R, Part II, Memorandum items 2(a) through 2(g).

Remaining Maturity

One year or less
Greater than one year
& less than or equal to
five years
Greater than five years

Interest
Rate

Foreign
exchange
rate and
gold

0.0%

1.0%

Credit
(investment
grade
reference
assets)
5.0%

0.5%

5.0%

1.5%

7.5%

Credit (noninvestment
Equity
grade reference
assets)

Precious
metals
(except
gold)

Other

10.0%

6.0%

7.0%

10.0%

5.0%

10.0%

8.0%

7.0%

12.0%

5.0%

10.0%

10.0%

8.0%

15.0%

Under the Federal Reserve’s regulatory capital rules and for purposes of
Schedule HC-R, Part II, the existence of a legally enforceable bilateral netting
agreement between the reporting holding company and a counterparty may be taken
into consideration when determining both the current credit exposure and the
potential future exposure of derivative contracts. For further information on the
treatment of bilateral netting agreements covering derivative contracts, refer to the
instructions for Schedule HC-R, Part II, Memorandum item 1, and §.34 of the
regulatory capital rules.
When assigning to OTC derivative exposures to risk weight categories, holding
companies can recognize the risk-mitigating effects of financial collateral by using
either the simple approach or the collateral haircut approach, as described in §.37 of
the regulatory capital rules.


In column C–0% risk weight, include the credit equivalent amount of over-thecounter derivative contracts with counterparties who meet, or that have guarantees
or collateral that meets, the criteria for the zero percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above. This includes over-the-counter derivative
contracts that are marked-to-market on a daily basis and subject to a daily margin
maintenance requirement, to the extent the contracts are collateralized by cash on
deposit at the reporting institution.



In column F–10% risk weight, include the credit equivalent amount of over-thecounter derivative contracts that are marked-to-market on a daily basis and
subject to a daily margin maintenance requirement, to the extent the contracts are
collateralized by a sovereign exposure n that qualifies for a zero percent risk
weight under §.32 of the regulatory capital rules.



In column G–20% risk weight, include the credit equivalent amount of over-thecounter derivative contracts with counterparties who meet, or that have guarantees
or collateral that meets, the criteria for the 20 percent risk weight category as
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described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above.


In column H–50% risk weight, include the credit equivalent amount of over-thecounter derivative contracts with counterparties who meet, or that have guarantees
or collateral that meets, the criteria for the 50 percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above.



In column I–100% risk weight, include the credit equivalent amount of over-thecounter derivative contracts with counterparties who meet, or that have guarantees
or collateral that meets, the criteria for the 100 percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above. Also include the portion of the credit equivalent
amount reported in column B that is not included in columns C through H, J, and
R.



In column J–150% risk weight, include the credit equivalent amount of over-thecounter derivative contracts with counterparties who meet, or that have guarantees
or collateral that meets, the criteria for the 150 percent risk weight category as
described in the instructions for Risk-Weighted Assets and for Schedule HC-R,
Part II, items 1 through 8, above.



In columns R and S–Application of Other Risk-Weighting Approaches, include the
portion of over-the-counter derivative contracts that is secured by qualifying
financial collateral that meets the definition of a securitization exposure in §.2 of
the regulatory capital rules or is a mutual fund only if the holding company
chooses to recognize the risk-mitigating effects of the securitization exposure or
mutual fund collateral under the simple approach or the collateral haircut
approach outlined in §.37 of the regulatory capital rules. Under the simple
approach, the risk weight assigned to the collateralized portion of the over-thecounter derivative exposure may not be less than 20 percent.
o Include in column R the portion of over-the-counter derivative contracts
secured by the fair value or adjusted fair value of securitization exposure or
mutual fund collateral as determined under the simple approach or the
collateral haircut approach, respectively; however, the holding company must
apply the same approach for all over-the-counter derivative contracts. In
addition, if the holding company applies the simple approach, it must apply
the same approach – either the Simplified Supervisory Formula Approach or
the Gross-Up Approach – that it applies to determine the risk-weighted asset
amounts of its on- and off-balance sheet securitization exposures that are
reported in Schedule HC-R, Part II, items 9 and 10.
o Report in column S the risk-weighted asset amount of the securitization
exposure or mutual fund collateral that collateralizes the portion of over-thecounter derivative contracts secured by such collateral. Any remaining
portion of the over-the-counter derivative exposure that is uncollateralized or
collateralized by other qualifying collateral would be reported in columns C
through J, as appropriate.

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For further information, see the discussions of “Treatment of Collateral and
Guarantees” and “Risk-Weighted Assets for Securitization Exposures” in the
General Instructions for Schedule HC-R, Part II.
21

Centrally cleared derivatives. Report in column B the credit equivalent amount of
centrally cleared derivative contracts covered by the regulatory capital rules. Include
centrally cleared credit derivative contracts held for trading purposes and subject to
the market risk capital rule. Do not include over-the-counter derivative contracts. Do
not include centrally cleared derivative contracts that meet the definition of a
securitization exposure as described in §.2 of the regulatory capital rules; such
derivative contracts must be reported in Schedule HC-R, Part II, item 10.
The credit equivalent amount of a centrally cleared derivative contract is the sum of
its current credit exposure (as reported in Schedule HC-R, Memorandum item 1), plus
the potential future exposure over the remaining life of the derivative contract, plus
the fair value of collateral posted by the clearing member client and held by the
central counterparty or a clearing member in a manner that is not bankruptcy remote.
The current credit exposure of a derivative contract is (1) the fair value of the contract
when that fair value is positive and (2) zero when the fair value of the contract is
negative or zero. The potential future credit exposure of a contract, which is based on
the type of contract and the contract's remaining maturity, is determined by
multiplying the notional principal amount of the contract by the appropriate credit
conversion factor from the following chart. The notional principal amounts of the
reporting holding company’s centrally cleared derivatives that are subject to the
risk-based capital requirements are reported by remaining maturity in Schedule HCR, Part II, Memorandum items 3(a) through 3(g).

Remaining Maturity

One year or less
Greater than one year
& less than or equal to
five years
Greater than five years

Interest
Rate

Foreign
exchange
rate and
gold

0.0%

1.0%

Credit
(investment
grade
reference
assets)
5.0%

0.5%

5.0%

1.5%

7.5%

Credit (noninvestment
Equity
grade reference
assets)

Precious
metals
(except
gold)

Other

10.0%

6.0%

7.0%

10.0%

5.0%

10.0%

8.0%

7.0%

12.0%

5.0%

10.0%

10.0%

8.0%

15.0%



In column C–0% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with central counterparties (CCPs) and other
counterparties who meet, or that have guarantees or collateral that meets, the
criteria for the zero percent risk weight category as described in the instructions
for Risk-Weighted Assets and for Schedule HC-R, Part II, items 1 through 8,
above.



In column D–2% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with Qualified Central Counterparties (QCCPs) where
the collateral posted by the holding company to the QCCP or clearing member is
subject to an arrangement that prevents any losses to the clearing member client
due to the joint default or a concurrent insolvency, liquidation, or receivership
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proceeding of the clearing member and any other clearing member clients of the
clearing member; and the clearing member client holding company has conducted
sufficient legal review to conclude with a well-founded basis (and maintains
sufficient written documentation of that legal review) that in the event of a legal
challenge (including one resulting from default or from liquidation, insolvency,
or receivership proceeding) the relevant court and administrative authorities
would find the arrangements to be legal, valid, binding and enforceable under the
law of the relevant jurisdictions. See the definition of QCCP in §.2 of the
regulatory capital rules.

22



In column E–4% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with QCCPs in all other cases that do not meet the
qualification criteria for a 2 percent risk weight, as described in §.2 of the
regulatory capital rules.



In column G–20% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with CCPs and other counterparties who meet, or that
have guarantees or collateral that meets, the criteria for the 20 percent risk weight
category as described in the instructions for Risk-Weighted Assets and for
Schedule HC-R, Part II, items 1 through 8, above.



In column H–50% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with CCPs and other counterparties who meet, or that
have guarantees or collateral that meets, the criteria for the 50 percent risk weight
category as described in the instructions for Risk-Weighted Assets and for
Schedule HC-R, Part II, items 1 through 8, above.



In column I–100% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with CCPs and other counterparties who meet, or that
have guarantees or collateral that meets, the criteria for the 100 percent risk
weight category as described in the instructions for Risk-Weighted Assets and for
Schedule HC-R, Part II, items 1 through 8, above. Also include the portion of the
credit equivalent amount reported in column B that is not included in columns C
through H and J.



In column J–150% risk weight, include the credit equivalent amount of centrally
cleared derivative contracts with CCPs and other counterparties who meet, or that
have guarantees or collateral that meets, the criteria for the 150 percent risk
weight category as described in the instructions for Risk-Weighted Assets and for
Schedule HC-R, Part II, items 1 through 8, above.

Unsettled transactions (failed trades). Note: This item includes unsettled transactions
in the reporting holding company’s trading book and in its banking book. Report as
unsettled transactions all on- and off-balance sheet transactions involving securities,
foreign exchange instruments, and commodities that have a risk of delayed settlement or
delivery, or are already delayed, and against which the reporting holding company must
hold risk-based capital as described in §.38 of the regulatory capital rules.

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For transactions that are delivery-versus-payment (DvP) transactions26 and paymentversus-payment (PvP) transactions,27 report in column A the positive current exposure of
those unsettled transactions with a normal settlement period in which the reporting
holding company’s counterparty has not made delivery or payment within five business
days after the settlement date, which are the DvP and PvP transactions subject to risk
weighting under §.38 of the regulatory capital rules. Positive current exposure is equal to
the difference between the transaction value at the agreed settlement price and the current
market price of the transaction, if the difference results in a credit exposure of the holding
company to the counterparty.
For delayed non-DvP/non-PVP transactions,28 also include in column A the current fair
value of the deliverables owed to the holding company by the counterparty in those
transactions with a normal settlement period in which the reporting holding company has
delivered cash, securities, commodities, or currencies to its counterparty, but has not
received its corresponding deliverables, which are the non-DvP/non-PvP transactions
subject to risk weighting under §.38 of the regulatory capital rules.
Do not include in this item: (1) cleared transactions that are marked-to-market daily and
subject to daily receipt and payment of variation margin; (2) repo-style transactions,
including unsettled repo-style transactions; (3) one-way cash payments on over-thecounter derivatives; and (4) transactions with a contractual settlement period that is
longer than the normal settlement period (generally greater than 5 business days).


In column C–0% risk weight, include the fair value of deliverables owed to the
holding company by a counterparty that qualifies for a zero percent risk weight
under §.32 of the regulatory capital rules that have been delayed one to four
business days for non-DvP/non-PvP transactions.



In column G–20% risk weight, include the fair value of deliverables owed to the
holding company by a counterparty that qualifies for a 20 percent risk weight
under §.32 of the regulatory capital rules that have been delayed one to four
business days for non-DvP/non-PvP transactions.



In column H–50% risk weight, include the fair value of deliverables owed to the
holding company by a counterparty that qualifies for a 50 percent risk weight
under §.32 of the regulatory capital rules that have been delayed one to four
business days for non-DvP/non-PvP transactions.



In column I–100% risk weight, include:
o The fair value of deliverables owed to the holding company by a
counterparty that qualifies for a 100 percent risk weight under §.32 of the

26

Delivery-versus-payment transaction means a securities or commodities transaction in which the buyer is
obligated to make payment only if the seller has made delivery of the securities or commodities and the seller is
obligated to deliver the securities or commodities only if the buyer has made payment.
27

Payment-versus-payment transaction means a foreign exchange transaction in which each counterparty is
obligated to make a final transfer of one or more currencies only if the other counterparty has made a final transfer
of one or more currencies.
28

Non-DvP/non-PvP transaction means any other delayed or unsettled transaction that does not meet the definition
of a delivery-versus-payment or a payment-versus-payment transaction.
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regulatory capital rules that have been delayed one to four business days
for non-DvP/non-PvP transactions.
o The positive current exposure of DvP and PvP transactions in which the
counterparty has not made delivery or payment within 5 to 15 business
days after the contractual settlement date.


In column J–150% risk weight, include the fair value of deliverables owed to the
holding company by a counterparty that qualifies for a 150 percent risk weight
under §.32 of the regulatory capital rules that have been delayed one to four
business days for non-DvP/non-PvP transactions.



In column O–625% risk weight, the positive current exposure of DvP and PvP
transactions in which the counterparty has not made delivery or payment within
16 to 30 business days after the contractual settlement date.



In column P–937.5% risk weight, the positive current exposure of DvP and PvP
transactions in which the counterparty has not made delivery or payment within
31 to 45 business days after the contractual settlement date.



In column Q–1250% risk weight, include:
o The positive current exposure of DvP and PvP transactions in which the
counterparty has not made delivery or payment within 46 or more business
days after the contractual settlement date;
o The fair value of the deliverables in Non-DvP/non-PvP transactions in which
the holding company has not received deliverables from the counterparty five
or more business days after which the delivery was due.

Totals
23

Total assets, derivatives, off-balance sheet items, and other items subject to risk
weighting by risk weight category. For each of columns C through P, report the
sum of items 11 through 22. For column Q, report the sum of items 10 through 22.

24

Risk weight factor.

25

Risk-weighted assets by risk weight category. For each of columns C through Q,
multiply the amount in item 23 by the risk weight factor specified for that column in
item 24.

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Risk-weighted assets for purposes of calculating the allowance for loan and lease
losses 1.25 percent threshold. Report the sum of:
 Schedule HC-R, Part II:
o Items 2(b) through 20, column S;
o Items 9(a), 9(b), 9(c), 9(d), and 10, columns T and U; and
o Item 25, columns C through Q
 LESS: Schedule HC-R, Part I:
o The portion of item 10(b) composed of “Investments in the institution’s own
shares to the extent not excluded as part of treasury stock,”
o The portion of item 10(b) composed of “Reciprocal cross-holdings in the
capital of financial institutions in the form of common stock,” and
o Items 11, 13 through 17, 24, and 33

NOTE: Item 27 is applicable only to holding companies that are subject to the market risk
capital rule.
27

Standardized market risk-weighted assets. Report the amount of the holding
company’s standardized market risk-weighted assets. This line item is applicable only
to those holding companies covered by Subpart F of the regulatory capital rules (i.e.,
the market risk capital rule), as provided in §.201 of the regulatory capital rules.
A holding company’s measure for market risk for its covered positions is the sum of
its value-at-risk (VaR)-based, stressed VaR-based, incremental risk, and
comprehensive risk capital requirements plus its specific risk add-ons and any capital
requirement for de minimis exposures. A holding company’s market risk-weighted
assets equal its measure for market risk multiplied by 12.5 (the reciprocal of the
minimum 8.0 percent capital ratio).
A covered position is a trading asset or trading liability (whether on- or off-balance
sheet), as reported on Schedule HC–D, that is held for any of the following reasons:
(1) For the purpose of short-term resale;
(2) With the intent of benefiting from actual or expected short-term price movements;
(3) To lock in arbitrage profits; or
(4) To hedge another covered position.
Additionally, the trading asset or trading liability must be free of any restrictive
covenants on its tradability or the holding company must be able to hedge the
material risk elements of the trading asset or trading liability in a two-way market. A
covered position also includes a foreign exchange or commodity position, regardless
of whether the position is a trading asset or trading liability (excluding structural
foreign currency positions if supervisory approval has been granted to exclude such
positions).
A covered position does not include:
(1) An intangible asset (including any servicing asset);
(2) A hedge of a trading position that is outside the scope of the holding company’s
hedging strategy;
(3) Any position that, in form or substance, acts as a liquidity facility that provides
support to asset-backed commercial paper;
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(4) A credit derivative recognized as a guarantee for risk-weighted asset calculation
purposes under the regulatory capital rules for credit risk;
(5) An equity position that is not publicly traded (other than a derivative that
references a publicly traded equity);
(6) A position held with the intent to securitize; or
(7) A direct real estate holding.
28

Risk-weighted assets before deductions for excess allowance for loan and lease
losses and allocated transfer risk reserve. Report the sum of items 2(b) through 20,
column S; items 9(a), 9(b), 9(c), 9(d), and 10, columns T and U; item 25, columns C
through Q; and, if applicable, item 27. (Item 27 is applicable only to holding
companies that are subject to the market risk capital rule).

29

LESS: Excess allowance for loan and lease losses. Report the amount, if any, by
which the holding company’s allowance for loan and lease losses exceeds 1.25
percent of the holding company’s risk-weighted assets base reported in Schedule HCR, Part II, item 26. The amount to be reported in this item equals Schedule HC, item
4(c), “Allowance for loan and lease losses,” less Schedule HI-B, Part II,
Memorandum item 1, “Allocated transfer risk reserve included in Schedule HI-B,
Part II, item 7, above,” plus Schedule HC-G, item 3, “Allowance for credit losses on
off-balance sheet credit exposures,” less Schedule HC-R, Part I, item 30(a),
“Allowance for loan and lease losses includable in Tier 2 capital.”

30

LESS: Allocated transfer risk reserve. Report the entire amount of any allocated
transfer risk reserve (ATRR) the reporting holding company is required to establish
and maintain as specified in Section 905(a) of the International Lending Supervision
Act of 1983, in the agency regulations implementing the Act (Subpart D of Federal
Reserve Regulation K), and in any guidelines, letters, or instructions issued by the
agencies. The entire amount of the ATRR equals the ATRR related to loans and
leases held for investment (which is reported in Schedule HI-B, Part II, Memorandum
item 1) plus the ATRR for assets other than loans and leases held for investment.

31

Total risk-weighted assets. Report the amount derived by subtracting items 29 and
30 from item 28.

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Memoranda
Item No. Caption and Instructions
M1

Current credit exposure across all derivative contracts covered by the regulatory
capital rules. Report the total current credit exposure amount for all interest rate,
foreign exchange rate, gold, credit (investment grade reference assets), credit (noninvestment grade reference assets), equity, precious metals (except gold), and other
derivative contracts covered by the regulatory capital rules after considering
applicable legally enforceable bilateral netting agreements. Holding companies that
are subject to Subpart F of the regulatory capital rules should exclude all covered
positions subject to these guidelines, except for foreign exchange derivatives that are
outside of the trading account. Foreign exchange derivatives that are outside of the
trading account and all over-the-counter (OTC) derivatives continue to have a
counterparty credit risk capital charge and, therefore, a current credit exposure
amount for these derivatives should be reported in this item.
Include the current credit exposure arising from credit derivative contracts where the
holding company is the protection purchaser (beneficiary) and the credit derivative
contract is either (a) defined as a covered position under the market risk rule or (b)
not defined as a covered position under the market risk rule and is not recognized as a
guarantee for regulatory capital purposes.
Written option contracts except for those that are, in substance, financial guarantees,
are not covered by the regulatory capital rules.
Purchased options held by the reporting holding company that are traded on an
exchange are covered by the regulatory capital rules unless such options are subject to
a daily variation margin. Variation margin is defined as the gain or loss on open
positions, calculated by marking to market at the end of each trading day. Such gain
or loss is credited or debited by the clearing house to each clearing member's account,
and by members to their customers' accounts.
If a written option contract acts as a financial guarantee that does not meet the
definition of a securitization exposure as described in §.2 of the regulatory capital
rules, then for risk-based capital purposes the notional amount of the option should be
included in Schedule HC-R, Part II, item 17, column A, as part of "All other offbalance sheet liabilities." An example of such a contract occurs when the reporting
holding company writes a put option to a second holding company or a bank that has
a loan to a third party. The strike price would be the equivalent of the par value of the
loan. If the credit quality of the loan deteriorates, thereby reducing the value of the
loan to the second holding company or bank, the reporting holding company would
be required by the second holding company or bank to take the loan onto its books.
Do not include derivative contracts that meet the definition of a securitization
exposure as described in §.2 of the regulatory capital rules; such derivative contracts
must be reported in Schedule HC-R, Part II, item 10.
Current credit exposure (sometimes referred to as the replacement cost) is the fair
value of a derivative contract when that fair value is positive. The current credit
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exposure is zero when the fair value is negative or zero. Current credit exposure
should be derived as follows: Determine whether a qualifying master netting
agreement, as defined in §.2 of the regulatory capital rules, is in place between the
reporting holding company and a counterparty. If such an agreement is in place, the
fair values of all applicable derivative contracts with that counterparty that are
included in the netting agreement are netted to a single amount.
Next, for all other contracts covered by the regulatory capital rules that have positive
fair values, the total of the positive fair values is determined. Then, report in this item
the sum of (i) the net positive fair values of applicable derivative contracts subject to
qualifying master netting agreements and (ii) the total positive fair values of all other
contracts covered by the regulatory capital rules for both over-the-counter and
centrally cleared contracts. The current credit exposure reported in this item is a
component of the credit equivalent amount of derivative contracts that is to be
reported in Schedule HC-R, items 20 or 21, column B, depending on whether the
contracts are centrally cleared.
M2

Notional principal amounts of over-the-counter derivative contracts. Report in
the appropriate subitem and column the notional amount or par value of all over-thecounter derivative contracts, including credit derivatives, that are subject to the
regulatory capital rules. Such contracts include swaps, forwards, and purchased
options. Do not include over-the-counter derivative contracts that meet the definition
of a securitization exposure as described in §.2 of the regulatory capital rules; such
derivative contracts must be reported in Schedule HC-R, Part II, item 10. Report
notional amounts and par values in the column corresponding to the contract's
remaining term to maturity from the report date. Remaining maturities are to be
reported as (1) one year or less in column A, (2) over one year through five years in
column B, or (3) over five years in column C.
The notional amount or par value to be reported for an off-balance-sheet derivative
contract with a multiplier component is the contract's effective notional amount or par
value. (For example, a swap contract with a stated notional amount of $1,000,000
whose terms call for quarterly settlement of the difference between 5 percent and
LIBOR multiplied by 10 has an effective notional amount of $10,000,000.)
The notional amount to be reported for an amortizing derivative contract is the
contract's current (or, if appropriate, effective) notional amount. This notional
amount should be reported in the column corresponding to the contract's remaining
term to final maturity.
For descriptions of "interest rate contracts," "foreign exchange contracts,"
"commodity and other contracts," and "equity derivative contracts," refer to the
instructions for Schedule HC-L, item 12. For a description of “credit derivative
contracts,” refer to the instructions for Schedule HC-L, item 7.

M3

Notional principal amounts of centrally cleared derivative contracts. Report in
the appropriate subitem and column the notional amount or par value of all centrally
cleared derivative contracts, including credit derivatives, that are subject to the
regulatory capital rules. Such contracts include swaps, forwards, and purchased
options. Do not include centrally cleared derivative contracts that meet the definition
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of a securitization exposure as described in §.2 of the regulatory capital rules; such
derivative contracts must be reported in Schedule HC-R, Part II, item 10. Report
notional amounts and par values in the column corresponding to the contract's
remaining term to maturity from the report date. Remaining maturities are to be
reported as (1) one year or less in column A, (2) over one year through five years in
column B, or (3) over five years in column C.
The notional amount or par value to be reported for a centrally cleared derivative
contract with a multiplier component is the contract's effective notional amount or par
value. (For example, a swap contract with a stated notional amount of $1,000,000
whose terms call for quarterly settlement of the difference between 5 percent and
LIBOR multiplied by 10 has an effective notional amount of $10,000,000.)
The notional amount to be reported for an amortizing derivative contract is the
contract's current (or, if appropriate, effective) notional amount. This notional
amount should be reported in the column corresponding to the contract's remaining
term to final maturity.
For descriptions of "interest rate contracts," "foreign exchange contracts,"
"commodity and other contracts," and "equity derivative contracts," refer to the
instructions for Schedule HC-L, item 12. For a description of “credit derivative
contracts,” refer to the instructions for Schedule HC-L, item 7.
2(a) and Interest rate. Report the remaining maturities of interest rate contracts that are
3(a)
subject to the regulatory capital rules.
2(b) and Foreign exchange rate and gold. Report the remaining maturities of foreign
3(b)
exchange contracts and the remaining maturities of gold contracts that are subject to
the regulatory capital rules.
2(c) and
3(c)

Credit (investment grade reference asset). Report the remaining maturities of
those credit derivative contracts where the reference entity meets the definition of
investment grade as described in §.2 of the regulatory capital rules.

2(d) and Credit (non-investment grade reference asset). Report the remaining maturities of
3(d)
those credit derivative contracts where the reference entity does not meet the
definition of investment grade as described in §.2 of the regulatory capital rules.
2(e) and
3(e)

Equity. Report the remaining maturities of equity derivative contracts that are
subject to the regulatory capital rules.

2(f) and
3(f)

Precious metals (except gold). Report the remaining maturities of other precious
metals contracts that are subject to the regulatory capital rules. Report all silver,
platinum, and palladium contracts.

2(g) and Other. Report the remaining maturities of other derivative contracts that are subject
3(g)
to the regulatory capital rules. For contracts with multiple exchanges of principal,
notional amount is determined by multiplying the contractual amount by the number
of remaining payments (i.e., exchanges of principal) in the derivative contract.

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Standardized market risk-weighted assets attributable to specific risk (included
in Schedule HC-R, item 27).
NOTE: Memorandum item 4 is applicable only to holding companies that are subject
to the market risk capital rule.
Report the amount of the holding company’s market risk-weighted assets attributable
to specific risk, included in Schedule HC-R, Part II, item 26, “Standardized
measurement of market risk-weighted assets (applicable to all holding companies that
are covered by the Market Risk Rule).” Specific risk refers to changes in the market
value of specific positions due to factors other than broad market movements and
includes event and default risk. For further background information, holding
companies should refer to the discussion of “Holding companies that are subject to
the market risk capital rules” in the Risk-Weighted Assets section of these
instructions, the line item instructions for Schedule HC-R, Part II, item 27, and the
regulatory capital rules for specific instructions on the calculation of the measure of
market risk.

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