On July 20, 2015, the US Board of Governors of the Federal Reserve System issued a final rule under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring all US bank holding companies with $250 billion or more in consolidated total assets or $10 billion or more in consolidated total on-balance sheet foreign exposures to annually calculate their systemic importance using the methodology in the final rule. BHCs that meet the "G-SIB threshold" will be required to hold additional common equity tier 1 capital (the "G-SIB surcharge") as an addition to the capital conservation buffer under the Federal Reserve's minimum risk-based capital requirements. Eight US firms are currently expected to qualify as G-SIBs under the final rule. Similar to the proposed rule, under the final rule, estimated surcharges for the eight G-SIBs range from 1.0 to 4.5 percent of each firm's total risk-weighted assets. Failure to meet the G-SIB surcharge will result in limitations on a G-SIB's ability to make certain capital distributions and discretionary bonus payments.
The Final Rule is generally similar to the proposed rule issued in December 2014 and is largely based on, but stricter than, an international standard adopted by the Basel Committee on Banking Supervision. The G-SIB surcharge will be phased in starting in 2016, and will become fully effective on January 1, 2019.
The press release is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150720a1.pdf and the final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150720a1.pdf.
The Shearman & Sterling client publication describing the highlights of the final rule and notable changes from the proposed rule is available at: http://www.shearman.com/en/newsinsights/publications/2015/07/surcharge-for-global-systemically-importantbanks.
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