On December 9, 2014, the US Board of Governors of the Federal Reserve System ("Federal Reserve Board") issued proposed amendments to its risk-based capital rule. The proposed amendments would impose a risk-based capital surcharge on eight US global systemically important banks ("G-SIBs"). The proposal is based on the international standard adopted by the Basel Committee on Banking Supervision (the "Basel Committee") in November 2011 and would amend the Federal Reserve Board's risk-based capital rules. However, the US G-SIB surcharge would exceed the amount established by the Basel Committee and would be based in part on a firm's reliance on short-term wholesale funding. The stated goal of the G-SIB surcharge is to internalize the negative externalities posed by G-SIBs, including those arising from the perception that they are too-big-to-fail, protect the financial system from spillover risks due to the G-SIB's failure and correct for competitive distortions created by a G-SIB banks' systemic nature. The G-SIB surcharge, if adopted as proposed, would become effective on the same timeline as the capital conservation buffer and thus would be phased in beginning in 2016 and become fully effective on January 1, 2019.
The proposal is available at:
http://www.federalreserve.gov/aboutthefed/files/bcreg20141209a1.pdf.
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