Section 217.204 - Measure for market risk(a)General requirement.(1) A Board-regulated institution must calculate its standardized measure for market risk by following the steps described in paragraph (a)(2) of this section. An advanced approaches Board-regulated institution also must calculate an advanced measure for market risk by following the steps in paragraph (a)(2) of this section.(2)Measure for market risk. A Board-regulated institution must calculate the standardized measure for market risk, which equals the sum of the VaR-based capital requirement, stressed VaR-based capital requirement, specific risk add-ons, incremental risk capital requirement, comprehensive risk capital requirement, and capital requirement for de minimis exposures all as defined under this paragraph (a)(2), (except, that the Board-regulated institution may not use the SFA in section 210(b)(2)(vii)(B) of this subpart for purposes of this calculation)[, plus any additional capital requirement established by the Board]. An advanced approaches Board-regulated institution that has completed the parallel run process and that has received notifications from the Board pursuant to § 217.121(d) also must calculate the advanced measure for market risk, which equals the sum of the VaR-based capital requirement, stressed VaR-based capital requirement, specific risk add-ons, incremental risk capital requirement, comprehensive risk capital requirement, and capital requirement for de minimis exposures as defined under this paragraph (a)(2) [, plus any additional capital requirement established by the Board].(i)VaR-based capital requirement. A Board-regulated institution's VaR-based capital requirement equals the greater of: (A) The previous day's VaR-based measure as calculated under § 217.205 ; or(B) The average of the daily VaR-based measures as calculated under § 217.205 for each of the preceding 60 business days multiplied by three, except as provided in paragraph (b) of this section.(ii)Stressed VaR-based capital requirement. A Board-regulated institution's stressed VaR-based capital requirement equals the greater of: (A) The most recent stressed VaR-based measure as calculated under § 217.206 ; or(B) The average of the stressed VaR-based measures as calculated under § 217.206 for each of the preceding 12 weeks multiplied by three, except as provided in paragraph (b) of this section.(iii)Specific risk add-ons. A Board-regulated institution's specific risk add-ons equal any specific risk add-ons that are required under § 217.207 and are calculated in accordance with § 217.210 .(iv)Incremental risk capital requirement. A Board-regulated institution's incremental risk capital requirement equals any incremental risk capital requirement as calculated under section 208 of this subpart.(v)Comprehensive risk capital requirement. A Board-regulated institution's comprehensive risk capital requirement equals any comprehensive risk capital requirement as calculated under section 209 of this subpart.(vi)Capital requirement for de minimis exposures. A Board-regulated institution's capital requirement for de minimis exposures equals: (A) The absolute value of the fair value of those de minimis exposures that are not captured in the Board-regulated institution's VaR-based measure or under paragraph (a)(2)(vi)(B) of this section; and(B) With the prior written approval of the Board, the capital requirement for any de minimis exposures using alternative techniques that appropriately measure the market risk associated with those exposures.(b)Backtesting. A Board-regulated institution must compare each of its most recent 250 business days' trading losses (excluding fees, commissions, reserves, net interest income, and intraday trading) with the corresponding daily VaR-based measures calibrated to a one-day holding period and at a one-tail, 99.0 percent confidence level. A Board-regulated institution must begin backtesting as required by this paragraph (b) no later than one year after the later of January 1, 2014 and the date on which the Board-regulated institution becomes subject to this subpart. In the interim, consistent with safety and soundness principles, a Board-regulated institution subject to this subpart as of January 1, 2014 should continue to follow backtesting procedures in accordance with the Board's supervisory expectations.(1) Once each quarter, the Board-regulated institution must identify the number of exceptions (that is, the number of business days for which the actual daily net trading loss, if any, exceeds the corresponding daily VaR-based measure) that have occurred over the preceding 250 business days.(2) A Board-regulated institution must use the multiplication factor in Table 1 to § 217.204 that corresponds to the number of exceptions identified in paragraph (b)(1) of this section to determine its VaR-based capital requirement for market risk under paragraph (a)(2)(i) of this section and to determine its stressed VaR-based capital requirement for market risk under paragraph (a)(2)(ii) of this section until it obtains the next quarter's backtesting results, unless the Board notifies the Board-regulated institution in writing that a different adjustment or other action is appropriate. Table 1 to § 217.204 -Multiplication Factors Based on Results of Backtesting
| Number of exceptions | Multiplication factor |
| 4 or fewer | 3.00 |
| 5 | 3.40 |
| 6 | 3.50 |
| 7 | 3.65 |
| 8 | 3.75 |
| 9 | 3.85 |
| 10 or more | 4.00 |