The Federal Reserve today finalized a very stringent capital surcharge for U.S. G-SIBs, adopting the proposed capital and short-term standards (see FSM Report GSIB2) with relatively minor changes. The FRB did not add to the surcharge an immediate, express requirement that it be factored into CCAR, but this will be considered later this year. We understand the Board decided not to do so today to give markets a bit of time to adjust to a surcharge framework some had expected would be significantly modified in final form – which it emphatically was not. Chair Yellen and other Governors made it clear that the Board intends the new surcharge framework to force the biggest banks to break themselves up unless the market permits them to raise massive amounts of additional capital, a message under-scored by the accompanying final rule for GE Capital.


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