In this report, we build on our summary in Tuesday’s daily to provide an in-depth analysis of the IMF’s annual Global Financial Stability report, which we conclude will play a major role in setting TBTF capital and “subsidy” standards as this debate advances in the U.S. upon release of the GAO subsidy study (see FSM Report TBTF11). The IMF concluded that, for systemically-important banks, the TBTF subsidy persists, despite the deluge of global reforms promulgated in the wake of the financial crisis. Although the subsidy was less in the U.S. than, for example, the EU, the IMF still found as much as $70 billion for the largest BHCs, reinforcing last week’s FRB-NY TBTF studies, which reach similar conclusions (see Client Reports TBTF14–15). The IMF pushes hard for bank levies, suggesting that the subsidy estimates can be used to calibrate the surcharge and thereby effectively offset the funding advantage. This differs from the Brown-Vitter capital surcharge (see FSM Report TBTF8), but is similar to a House proposal (see FSM Report TBTF10), not to mention the recent Camp big-bank tax.
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