Fed Finalizes Contentious Capital Surcharge, Nonbank Rules
By John Heltman

The Federal Reserve Board unanimously agreed on Monday to finalize two of its most significant unfinished rules, setting out a graduated surcharge for globally risky banks and establishing capital requirements for GE Capital, the first such regulation for a systemically important nonbank. Karen Shaw Petrou, managing principal of Federal Financial Analytics, said the purpose of the rule is clear — to break up the banks and incentivize other SIFIs to downsize as well. “The [Federal Reserve Board] clearly intends the very largest U.S. banks to buckle under this new capital regime, restructuring quickly and dramatically,” Petrou said. “It is no coincidence that the big banks are put under a break-em-up rule at the same time GE Capital is rewarded for self-amputation.” Separately, the board also approved final prudential standards for GE Capital Corp., one of only four nonbanks to be designated a systemically important financial institution by the Financial Stability Oversight Council. The final rule effectively applies many of the prudential standards required of bank holding companies but takes into account the firm’s announced plan to divest itself of many of its riskiest assets, with the ultimate goal of becoming de-designated by FSOC sometime in the future.