The Federal Reserve Board recently proposed for public comment amendments to its risk-based capital rule that would impose a risk-based capital surcharge on eight US global systemically important banks (“G-SIBs”). In general, the proposed G-SIB surcharge would be higher than the G-SIB surcharge agreed to by the Basel Committee. However, the Federal Reserve Board estimates that all eight of the G-SIBs would meet the G-SIB surcharge when fully phased in. The proposed surcharge would not apply to US bank holding companies controlled by foreign banking organizations, although the Federal Reserve Board requested comment on that aspect of the Proposal. If adopted as proposed, it would become fully effective on January 1, 2019.

Overview -

On December 9, 2014, the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) approved for public comment a proposed rule (the “Proposal”) imposing a risk-based capital surcharge that would apply to eight US G-SIBs.1 The Proposal is based on an international standard adopted by the Basel Committee on Banking Supervision (the “Basel Committee”) in November 2011 (after considering comments received on a proposal issued in July 2011) and further refined since that time. The Proposal would amend the Federal Reserve Board’s risk-based capital rules and was issued under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which generally requires the Federal Reserve Board to subject large bank holding companies to enhanced prudential standards. However, the Federal Reserve Board has delayed for future consideration whether to include the G-SIB surcharge as a component of its capital planning and CCAR programs, which require banking organizations to meet minimum capital requirements under stressed circumstances.