Stress Capital Buffer Framework
The Federal Reserve has finalized standards that, like the initial proposal,1 create a new prudential framework combining risk-based capital regulation for the largest banking organizations with the Board’s stress-testing CCAR construct.2 However, unlike the original stress capital buffer (SCB) and an accompanying proposal, the final rule does not add the enhanced supplementary leverage ratio (eSLR) into the new stress leverage buffer. Instead, as with the GSIB surcharge and the counter-cyclical capital buffer (CCyB), the eSLR remains part of the overall construct with which large banking organizations must comply to ensure capital-distribution capacity. Capital relief under this rule combines non-GSIB BHCs with assets over $100 billion and certain foreign banking organizations under the new tailoring framework6 and CCAR standards to provide a simplified, more standardized, and less costly framework.