Salt Report 3682– On July 20, 2015, The Federal Reserve Board approved a final rule requiring the largest, U.S. bank holding companies to further strengthen their capital positions. Under the rule, a firm that is identified as a global systemically important bank holding company (GSIB), will have to hold additional capital to increase its resiliency in light of the greater threat it poses to the financial stability of the United States.
The final rule establishes the criteria for identifying a GSIB and the methods that those firms will use to calculate a risk-based capital surcharge, which is calibrated to each firm’s overall systemic risk. Eight U.S. firms are currently expected to be identified as GSIBs under the final rule: Bank of America Corporation; The Bank of New York Mellon Corporation; Citigroup, Inc.; The Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Company.
“A key purpose of the capital surcharge is to require the firms themselves to bear the costs that their failure would impose on others,” Chair Janet L. Yellen said. “In practice, this final rule will confront these firms with a choice: they must either hold substantially more capital, reducing the likelihood that they will fail, or else they must shrink their systemic footprint, reducing the harm that their failure would do to our financial system. Either outcome would enhance financial stability.”