Purpose, applicability, and principle of conservatism.

(a) Purpose. This subpart establishes: (1) Minimum requirements for using Enterprise-specific internal risk measurement and management processes for calculating risk-based capital requirements; and (2) Methodologies for the Enterprises to calculate their advanced approaches total risk-weighted assets. (b) Applicability. (1) This subpart applies to each Enterprise. (2) An Enterprise must also include in its calculation of advanced credit risk-weighted assets under this subpart all covered positions, as defined in subpart F of this part. (c) Principle of conservatism. Notwithstanding the requirements of this subpart, an Enterprise may choose not to apply a provision of this subpart to one or more exposures provided that: (1) The Enterprise can demonstrate on an ongoing basis to the satisfaction of FHFA that not applying the provision would, in all circumstances, unambiguously generate a risk-based capital requirement for each such exposure greater than that which would otherwise be required under this subpart; (2) The Enterprise appropriately manages the risk of each such exposure; (3) The Enterprise notifies FHFA in writing prior to applying this principle to each such exposure; and (4) The exposures to which the Enterprise applies this principle are not, in the aggregate, material to the Enterprise.