Supervisory Policy and Guidance Topics
Market Risk Management
Market risk encompasses the risk of financial loss resulting from movements in market prices. Market risk is rated based upon, but not limited to, an assessment of the following evaluation factors:
- The sensitivity of the financial institution's earnings or the economic value of its capital to adverse changes in interest rates, foreign exchanges rates, commodity prices, or equity prices.
- The ability of management to identify, measure, monitor, and control exposure to market risk given the institution's size, complexity, and risk profile.
- The nature and complexity of interest rate risk exposure arising from nontrading positions.
- Where appropriate, the nature and complexity of market risk exposure arising from trading and foreign operations.
This topic also provides specific guidance on interest-rate risk, which is the exposure of a bank's current and future earnings and capital arising from adverse movements in interest rates, and the market risk capital rule, which establishes regulatory capital requirements for bank holding companies and state member banks with significant exposure to certain market risks.
Policy Letters
Market RiskFederal Financial Institutions Examination Council Issues Joint Statement on Managing the LIBOR Transition
Interagency Frequently Asked Questions (FAQs) on the Regulatory Capital Rule
Guidance on Model Risk Management
Application of the Market Risk Rule in Bank Holding Companies and State Member Banks
Interagency Policy on Banks/Thrifts Providing Financial Support to Funds Advised by the Banking Organization
Risk Management and Valuation of Mortgage Servicing Assets Arising from Mortgage Banking Activities
Risk Management and Valuation of Retained Interests Arising from Securitization Activities
Interagency Guidance on Common Questions About the Application of the Revised CAMELS Rating System
Uniform Financial Institutions Rating System
Rating the Adequacy of Risk Management Processes and Internal Controls at State Member Banks and Bank Holding Companies
Commodity Futures Trading Commission (CFTC) Swap Clearing Rules
Questions and Answers on Interagency Advisory on Interest Rate Risk Management
Interagency Advisory on Interest Rate Risk
Joint Agency Advisory on Rate-Sensitive Deposits
Joint Policy Statement on Interest Rate Risk
Supervisory Guidance on Equity Investment and Merchant Banking Activities
Regulatory Capital Treatment of Certain Centrally-cleared Derivative Contracts under the Board's Capital Rule
Procedures for a Banking Entity to Request an Extension of the One-Year Seeding Period for a Covered Fund
Initial Examinations for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security Based Swaps
Commodity Futures Trading Commission (CFTC) Swap Clearing Rules
Interagency Counterparty Credit Risk Management Guidance
Framework for Financial Holding Company Supervision
Sound Credit Risk Management and the Use of Internal Credit Risk Ratings at Large Banking Organizations
FFIEC Policy Statement on Investment Securities and End-User Derivatives Activities
Section 20 Subsidiaries - Additional Clarification of Revenue Test Treatment of Interest Income
Inspection Procedures for "Section 20 Subsidiaries"
Additional Resources
- Market Risk-Related Materials Under the Basel Framework
- Regulations
- Regulation Q (Subpart F): Risk-Weighted Assets--Market Risk
- Regulation R: Exceptions for Banks from the Definition of Broker in the Securities Exchange Act of 1934
Manual References
- Bank Holding Company Supervision Manual
- Section 2126.0, "Model Risk Management"
- Section 2126.1, "Investment Securities and End-User Derivatives Activities"
- Section 2126.3, "Risk-Focused Supervision (Counterparty Credit Risk Management Systems)"
- Section 2127.0, "Interest-Rate Risk (Risk Management and Internal Controls)"
- Commercial Bank Examination Manual
- Section 1200.1, "Uniform Financial Institutions Rating System and the Federal Reserve's Risk-Management Rating"
- Section 2500.1, "Investment Securities and End-User Activities"
- Section 3300.1, "Interest Rate Risk Management"
- Section 4027.1, "Model Risk Management"
- Trading and Capital-Markets Activities Manual
- Section 2010.1, "Market Risk"
- Section 3010.1, "Interest Rate Risk Management"
- Section 3040.1, "Equity Investment and Merchant Banking Activities"