The Federal Reserve has finalized a capital surcharge for the U.S. BHCs designated as global systemically-important banks (G-SIBs) and, perhaps, additional BHCs. The U.S. standards are considerably more stringent than the global G-SIB rules, reflecting the Federal Reserve’s determination to penalize U.S. BHCs for the cost they could pose to the financial system or national economy in the event of failure. In the event a designated U.S. BHC cannot or chooses not to raise additional capital, it may need to shrink in size or otherwise change its operations to reduce its systemic calculation under the FRB’s methodology. If the surcharge is factored into stress testing—to be determined—its strategic impact will be still more formidable.
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