Introduction
Section 217.32 of Regulation Q — titled simply “General risk weights” — is the backbone of the Standardized Approach to credit risk capital. It sets out, exposure type by exposure type, exactly which fixed risk weight a bank must apply, without any internal modelling of Probability of Default or Loss Given Default. This stands in contrast to the Internal Ratings-Based (IRB) approach under Subpart E, which our SA-CCR series has covered in depth — where banks estimate their own risk parameters and run them through the Table 1 capital formula.
This article covers §217.32 in its entirety, paragraph by paragraph, from (a) through (m). Nothing is split into a separate piece and nothing is condensed into a passing summary table — every exposure category the regulation addresses is given its own full treatment here, in the order the regulation presents them.
Two ideas to keep in mind throughout: first, many of the categories below are driven by Country Risk Classification (CRC) — the OECD consensus rating of sovereign default risk, which we defined precisely in our companion article on CRC and obligation type. Second, several categories use no rating at all — they are simply assigned one fixed weight regardless of the counterparty’s creditworthiness. Both patterns appear repeatedly across the thirteen paragraphs that follow.
(a) Sovereign Exposures
Sovereign exposures — claims on national governments — receive the most detailed treatment of any category in this section, with six distinct sub-rules.
U.S. Government Exposures
Exposures to the U.S. government, its central bank, or a U.S. government agency receive a 0% risk weight without exception. This also covers any portion of an exposure directly and unconditionally guaranteed by the U.S. government — including FDIC- or NCUA-insured deposit amounts.
“Notwithstanding any other requirement in this subpart, a Board-regulated institution must assign a zero percent risk weight to an exposure to the U.S. government, its central bank, or a U.S. government agency.”
Where the guarantee from the U.S. government is conditional rather than unconditional, the weight is 20% instead of 0%. A specific carve-out also applies to Paycheck Protection Program covered loans, as defined under the Small Business Act, which receive a 0% weight.
Other Sovereign Exposures — The CRC Table
For sovereign exposures generally, the risk weight is determined by Table 1 to §217.32, based on the sovereign’s CRC rating, or its OECD membership status if no CRC applies:
| CRC / Status | Risk Weight |
| CRC 0–1 | 0% |
| CRC 2 | 20% |
| CRC 3 | 50% |
| CRC 4–6 | 100% |
| CRC 7 | 150% |
| OECD Member, No CRC | 0% |
| Non-OECD Member, No CRC | 100% |
| Sovereign Default | 150% |
Local-Currency Exception
A bank may apply a lower risk weight than Table 1 would otherwise dictate if three conditions are simultaneously satisfied: the exposure is denominated in the sovereign’s own currency, the bank holds at least an equivalent amount of liabilities in that same currency, and the resulting weight is not lower than what the sovereign’s home country supervisor permits its own banks to use for the same exposure. This narrow exception primarily benefits banks operating directly within a foreign jurisdiction, funding local-currency sovereign exposures with local-currency deposits.
No-CRC Defaults
Absent a CRC rating, OECD membership becomes the deciding factor: an OECD member sovereign with no CRC defaults to a 0% weight, while a non-OECD sovereign with no CRC defaults to 100%.
Sovereign Default Override
If a sovereign default has occurred, the exposure must immediately receive a 150% risk weight — and this override persists for five years from the date of default, regardless of whether the CRC rating itself has since been revised.
(b) Multilateral Development Banks and Supranational Entities
This paragraph is short but absolute: certain named supranational institutions receive a flat 0% risk weight, with no CRC consideration and no conditions attached.
“A Board-regulated institution must assign a zero percent risk weight to an exposure to the Bank for International Settlements, the European Central Bank, the European Commission, the International Monetary Fund, the European Stability Mechanism, the European Financial Stability Facility, or an MDB.”
This list is exhaustive as written in the regulation — the Bank for International Settlements, the European Central Bank, the European Commission, the IMF, the European Stability Mechanism, the European Financial Stability Facility, and any Multilateral Development Bank (MDB) more broadly. These institutions are treated as carrying effectively no counterparty credit risk for regulatory capital purposes, reflecting their unique multilateral backing and capital structures.
(c) Exposures to Government-Sponsored Enterprises (GSEs)
GSEs — entities such as Fannie Mae and Freddie Mac — receive their own dedicated, CRC-independent treatment, split by the type of instrument held:
| Instrument Type | Risk Weight |
| GSE exposure (other than equity or preferred stock) | 20% |
| Preferred stock issued by a GSE | 100% |
The gap between these two weights is substantial — preferred stock is treated five times more conservatively than other GSE exposures, reflecting preferred stock’s subordinated position in the capital structure and its greater sensitivity to the issuer’s financial distress.
(d) Exposures to Depository Institutions, Foreign Banks, and Credit Unions
U.S. Depository Institutions and Credit Unions
Exposures to a depository institution or credit union organized under U.S. federal or state law receive a flat 20% risk weight, subject to the financial institution carve-out discussed below.
Foreign Banks — The CRC Table
Exposures to foreign banks follow a CRC-driven table that is consistently higher than the equivalent sovereign table at every rating band:
| CRC / Status | Risk Weight |
| CRC 0–1 | 20% |
| CRC 2 | 50% |
| CRC 3 | 100% |
| CRC 4–7 | 150% |
| OECD Member, No CRC | 20% |
| Non-OECD Member, No CRC | 100% |
| Sovereign Default | 150% |
The Short-Term Trade Finance Exception
A narrow exception applies to self-liquidating, trade-related contingent items arising from the movement of goods, with a maturity of three months or less. Such an exposure to a foreign bank receives a 20% weight even where the bank’s home country CRC (0 through 3, or OECD-member-with-no-CRC) would otherwise indicate a higher weight, and even against a non-OECD bank with no CRC, where the standard weight would otherwise be 100%.
“A Board-regulated institution must assign a 20 percent risk-weight to an exposure that is a self-liquidating, trade-related contingent item that arises from the movement of goods and that has a maturity of three months or less to a foreign bank whose home country has a CRC of 0, 1, 2, or 3, or is an OECD member with no CRC.”
The Financial Institution Carve-Out
Separately, any exposure to a financial institution that may be included in that institution’s own regulatory capital is assigned a 100% risk weight — unless the exposure is an equity exposure, a significant investment in an unconsolidated financial institution’s common stock, an amount already deducted from the bank’s own regulatory capital, or an exposure already subject to the 150% weight under the foreign bank table above. This rule exists to prevent banks from holding capital instruments of other financial institutions at favourable risk weights, since such cross-holdings can amplify systemic risk across the financial system.
(e) Exposures to Public Sector Entities (PSEs)
PSEs introduce a second organizing dimension beyond CRC: the distinction between general obligations (backed by the taxing power or full faith and credit of the issuer) and revenue obligations (backed only by a specific revenue stream).
U.S. PSEs
Domestic PSEs use a flat rule with no CRC involved at all:
| Obligation Type | Risk Weight |
| General obligation | 20% |
| Revenue obligation | 50% |
Foreign PSEs
Foreign PSEs use CRC-driven tables that differ by obligation type, with slightly different CRC bandings between the two tables as published in the regulation:
| CRC / Status | General Obligation | Revenue Obligation |
| CRC 0–1 | 20% | 50% |
| CRC 2 | 50% | 100% |
| CRC 3 | 100% | 100% |
| CRC 4–7 | 150% | 150% |
| OECD Member, No CRC | 20% | 50% |
| Non-OECD Member, No CRC | 100% | 100% |
| Sovereign Default | 150% | 150% |
Note that the general obligation table bands CRC as 0–1, 2, 3, and 4–7, while the revenue obligation table bands CRC as 0–1, 2–3, and 4–7 — these are reproduced exactly as the regulation structures them, not merged into a single banding scheme.
Lower Weight Permission
A bank may assign a lower risk weight than these tables specify if the PSE’s home country supervisor permits this locally, and provided the resulting weight is never lower than the sovereign weight that Table 1 would assign to that same country.
Sovereign Default Override for PSEs
As with direct sovereign and foreign bank exposures, a PSE exposure must be assigned a 150% risk weight immediately upon a determination that its home country has defaulted, or if such a default occurred within the preceding five years.
(f) Corporate Exposures
Corporate exposures use the simplest rule in the entire section: a flat 100% weight applies to essentially all corporate exposures, with no CRC differentiation whatsoever.
| Corporate Exposure Risk Weight = 100% |
| Applies universally, with the sole exceptions described below. |
The only departures from this flat weight relate to cash collateral posted to a Qualifying Central Counterparty (QCCP) in connection with a cleared transaction. Depending on which specific provisions of §217.35 the cleared transaction satisfies, such collateral can instead receive a 2% or 4% risk weight — a dramatically lower figure reflecting the much-reduced risk of centrally cleared, margined exposures relative to ordinary unsecured corporate credit.
(g) Residential Mortgage Exposures
Residential mortgages split into a favourable and an unfavourable category based on specific qualifying conditions.
The Qualifying 50% Weight
A first-lien residential mortgage receives a 50% weight only if all of the following hold simultaneously:
- The property is either owner-occupied or rented (not, for example, vacant land or under construction)
- The loan was made in accordance with prudent underwriting standards, including the loan amount as a percentage of the appraised value, with that value based on a qualifying appraisal or evaluation
- The loan is not 90 days or more past due and not carried in nonaccrual status
- The loan has not been restructured or modified
The 100% Default
Any first-lien residential mortgage that fails one or more of these conditions receives a 100% weight instead — as does every junior-lien residential mortgage, regardless of whether it would otherwise qualify.
Combining First and Junior Liens
If the same bank holds both the first-lien and junior-lien(s) on a property, with no other party holding an intervening lien, the bank must combine the exposures and treat them as a single first-lien exposure for risk-weighting purposes.
The HAMP Carve-Out
A loan modified or restructured solely under the U.S. Treasury’s Home Affordable Mortgage Program is not treated as “restructured or modified” for purposes of this paragraph — meaning a HAMP modification alone does not disqualify a mortgage from the 50% weight.
(h) Pre-Sold Construction Loans
A pre-sold construction loan — financing for construction where a purchase contract is already in place — receives a 50% weight so long as that purchase contract remains in force. If the purchase contract is cancelled, the weight rises to 100%.
| Pre-Sold Construction Loan: 50% (contract active) or 100% (contract cancelled) |
(i) Statutory Multifamily Mortgages
Statutory multifamily mortgages — a specifically defined category of multifamily residential financing — receive a flat 50% weight, with no further conditions attached in this paragraph.
| Statutory Multifamily Mortgage Risk Weight = 50% |
(j) High-Volatility Commercial Real Estate (HVCRE) Exposures
HVCRE exposures — a defined category of higher-risk commercial real estate financing, generally involving land acquisition, development, or construction with elevated risk characteristics — receive a flat 150% weight.
| HVCRE Exposure Risk Weight = 150% |
(k) Past Due Exposures
This paragraph applies a cross-cutting override to most categories already discussed: any exposure that is 90 days or more past due, or carried on nonaccrual status, must be reassigned a higher weight — with three explicit exceptions.
“Except for an exposure to a sovereign entity or a residential mortgage exposure or a policy loan, if an exposure is 90 days or more past due or on nonaccrual: A Board-regulated institution must assign a 150 percent risk weight to the portion of the exposure that is not guaranteed or that is unsecured.”
The three named exceptions — sovereign exposures, residential mortgage exposures, and policy loans — are governed by their own specific rules elsewhere in this section and are not subject to this override.
Where a past-due exposure is partly guaranteed or partly collateralized, the protected portion can instead receive the risk weight that would apply under the guarantee substitution rules of §217.36 or the collateral recognition rules of §217.37. Only the unguaranteed, unsecured remainder is forced to the blanket 150%.
(l) Other Assets
This paragraph is the broadest in the section, covering a range of balance sheet items that do not fit any of the named exposure categories above.
Cash and Gold Bullion
Cash held at subsidiary depository institutions, or in transit, receives a 0% weight — as does gold bullion held in the institution’s own vaults, or in another institution’s vaults on an allocated basis, to the extent offset by gold bullion liabilities. A state member bank additionally receives 0% on exposures arising from the settlement of cash transactions (equities, fixed income, spot FX, spot commodities) with a central counterparty, where the central counterparty assumes no ongoing counterparty credit risk after settlement.
Cash Items in Process of Collection
Cash items still being processed for collection receive a 20% weight.
Deferred Tax Assets (DTAs)
DTAs arising from temporary differences that the bank could realize through net operating loss carrybacks receive a 100% weight.
MSAs and Non-Carryback DTAs — The 250% Weight
Mortgage servicing assets (MSAs), and DTAs arising from temporary differences that cannot be realized through net operating loss carrybacks, receive a 250% weight — but only to the extent these amounts are not already deducted from common equity tier 1 capital under §217.22(d). This is the highest risk weight named anywhere in §217.32, reflecting regulators’ view that these assets carry unusually high uncertainty in a stress scenario.
“A Board-regulated institution must assign a 250 percent risk weight to the portion of each of the following items to the extent it is not deducted from common equity tier 1 capital pursuant to § 217.22(d): MSAs; and DTAs arising from temporary differences that the Board-regulated institution could not realize through net operating loss carrybacks.”
The Final Catch-All
Any asset not specifically assigned a different weight anywhere in this section, and not already deducted from tier 1 or tier 2 capital, defaults to a 100% weight. This catch-all ensures that every balance sheet asset has a defined risk weight under the Standardized Approach, even where the regulation does not name it explicitly.
The State Member Bank Flexibility
A state member bank may, in narrow circumstances, assign an asset that fits no named category to the risk weight category that would apply to bank holding companies and savings and loan holding companies under this same part — but only if the bank is not authorized to hold the asset under applicable law (other than debt previously contracted or similar authority), and the risks of the asset are substantially similar to those of assets already assigned a weight below 100%.
(m) Insurance Assets
The final paragraph addresses assets specific to insurance operations within a bank holding company or savings and loan holding company structure.
Assets Held in a Separate Account
Individual assets held in a separate account that does not qualify as a non-guaranteed separate account must be risk-weighted exactly as if those individual assets were held directly by the holding company — there is no separate-account discount in this case. Conversely, an asset held in a qualifying non-guaranteed separate account receives a 0% weight.
Policy Loans
Policy loans — loans made against the cash value of an insurance policy — receive a flat 20% weight.
| Policy Loan Risk Weight = 20% |
Figure 1: Every exposure category under §217.32(a)–(m), at a glance | Source: 12 CFR §217.32
Worked Examples Across Multiple Categories
| Worked Example 1 — Sovereign Bond (Paragraph a) Exposure: $20,000,000 bond, sovereign CRC = 3 Table 1 to §217.32: CRC 3 -> 50% Risk-Weighted Asset Amount = 20,000,000 × 0.50 = $10,000,000 |
| Worked Example 2 — GSE Preferred Stock (Paragraph c) Exposure: $4,000,000 of preferred stock issued by a GSE Paragraph (c)(2): GSE preferred stock -> 100% Risk-Weighted Asset Amount = 4,000,000 × 1.00 = $4,000,000 Compare to the same GSE’s senior unsecured debt of the same amount, which would receive only 20% under (c)(1) — $800,000 — a five-fold difference purely from instrument type. |
| Worked Example 3 — Qualifying Residential Mortgage (Paragraph g) Exposure: $350,000 first-lien mortgage, owner-occupied, prudently underwritten, current on payments, not modified All four qualifying conditions in (g)(1) are satisfied -> 50% Risk-Weighted Asset Amount = 350,000 × 0.50 = $175,000 If this same loan later becomes 95 days past due, paragraph (k) does NOT override it — residential mortgages are explicitly excluded from the past-due override — so the 50% (or 100% if no longer qualifying under (g)(1)(iii)) weight continues to apply via paragraph (g) itself rather than the blanket 150%. |
| Worked Example 4 — Mortgage Servicing Asset (Paragraph l) Exposure: $2,000,000 MSA, none of which has been deducted from common equity tier 1 capital Paragraph (l)(4): MSA, not CET1-deducted -> 250% Risk-Weighted Asset Amount = 2,000,000 × 2.50 = $5,000,000 This is the highest weight in the entire section — more than double even the HVCRE and sovereign-default weights of 150%. |
| Worked Example 5 — Policy Loan (Paragraph m) Exposure: $150,000 policy loan against an insurance policy’s cash value, held by a savings and loan holding company Paragraph (m)(2): Policy loan -> 20% Risk-Weighted Asset Amount = 150,000 × 0.20 = $30,000 |
Quick Summary
- (a) Sovereign exposures: 0% to 150% based on CRC, with 0% for the U.S. government and a 150% override for any sovereign default within the past five years.
- (b) MDBs and named supranational entities (BIS, ECB, European Commission, IMF, ESM, EFSF): flat 0%, no conditions.
- (c) GSE exposures: 20% generally, but 100% for GSE preferred stock specifically.
- (d) Banks and credit unions: 20% for U.S. institutions; 20% to 150% for foreign banks based on CRC, with a 20% trade-finance exception and a 100% financial-institution carve-out.
- (e) PSEs: flat 20%/50% (general/revenue) for U.S. PSEs; CRC-driven tables for foreign PSEs, again split by obligation type.
- (f) Corporate exposures: flat 100%, with 2%–4% exceptions only for QCCP-related cash collateral.
- (g) Residential mortgages: 50% if four qualifying conditions are met; 100% otherwise, and for all junior liens.
- (h) Pre-sold construction loans: 50% while the purchase contract is active; 100% if cancelled.
- (i) Statutory multifamily mortgages: flat 50%.
- (j) HVCRE exposures: flat 150%.
- (k) Past due exposures (90+ days or nonaccrual): 150% override on the unguaranteed/unsecured portion, except for sovereigns, residential mortgages, and policy loans.
- (l) Other assets: 0% for cash and qualifying gold bullion, 20% for cash items in collection, 100% for carryback-realizable DTAs, 250% for MSAs and non-carryback DTAs (to the extent not CET1-deducted), and 100% as the final catch-all for anything not otherwise named.
- (m) Insurance assets: separate-account assets weighted as if held directly (or 0% if a qualifying non-guaranteed separate account); policy loans at a flat 20%.
Frequently Asked Questions
Why does §217.32 treat some exposure types with a CRC-based table and others with one flat percentage?
CRC-based tables apply specifically where the exposure’s risk is tied to a sovereign’s creditworthiness — direct sovereign debt, foreign banks (whose risk is partly a function of their home country’s stability), and foreign PSEs. Categories like corporate exposures, HVCRE, or policy loans carry risk profiles that the regulation has determined do not vary meaningfully by country rating, so a single flat weight is used instead for simplicity and consistency.
Which exposure types are explicitly excluded from the 90-day past-due override in paragraph (k)?
Three categories are named exceptions: sovereign exposures, residential mortgage exposures, and policy loans. Each of these has its own dedicated treatment elsewhere in §217.32 (paragraphs a, g, and m respectively) that already accounts for credit deterioration in its own terms, so the blanket 150% past-due override does not additionally apply on top of those existing rules.
Why is the risk weight for MSAs and certain DTAs (250%) higher than even HVCRE or sovereign default (150%)?
The 250% weight reflects regulators’ specific concern that MSAs and deferred tax assets not realizable through loss carrybacks are unusually difficult to value reliably and tend to lose value precisely during periods of bank stress — MSA values typically fall when interest rates drop and mortgage prepayments accelerate, often coinciding with broader economic weakness. This makes them a particularly poor source of loss-absorbing capacity exactly when it is most needed, justifying a weight higher than even the most severe credit-risk categories named elsewhere in the section.
Does a bank ever get to choose between the Standardized Approach treatment in §217.32 and a more favourable IRB treatment?
This depends on which approach the bank as a whole, or specific portfolios within it, are approved to use under the broader capital framework. Smaller banks generally use the Standardized Approach exclusively. Larger, more sophisticated banks approved for the IRB approach under Subpart E may still apply Standardized Approach treatment to certain exposure types or portfolios where IRB modelling has not been approved, meaning §217.32 and the IRB Table 1 formula can coexist within the same institution for different parts of its balance sheet.
Is gold bullion always assigned a 0% risk weight under this section?
Only under specific conditions set out in paragraph (l)(1). Gold bullion held in the institution’s own vaults, or held in another depository institution’s vaults on an allocated basis, receives 0% only to the extent that the gold bullion assets are offset by corresponding gold bullion liabilities. Gold bullion held as a general investment position, without an offsetting liability, would not qualify for this specific 0% treatment and would instead fall under the general asset rules.