Introduction and exposure measurement.

CFR · 2024-01-01 · US · Title 12

(a) (2) An Enterprise must treat an investment in a separate account (as defined in § 1240.2) as if it were an equity exposure to an investment fund. (b) (1) For the on-balance sheet component of an equity exposure, the Enterprise's carrying value of the exposure; (2) [Reserved] (3) For the off-balance sheet component of an equity exposure that is not an equity commitment, the effective notional principal amount of the exposure, the size of which is equivalent 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, minus the adjusted carrying value of the on-balance sheet component of the exposure as calculated in paragraph (b)(1) of this section; and (4) For a commitment to acquire an equity exposure (an equity commitment), the effective notional principal amount of the exposure is multiplied by the following conversion factors (CFs): (i) Conditional equity commitments with an original maturity of one year or less receive a CF of 20 percent. (ii) Conditional equity commitments with an original maturity of over one year receive a CF of 50 percent. (iii) Unconditional equity commitments receive a CF of 100 percent.

official document · source cfr-2024 · id 12:§ 1240.51