#FR Y-15

22 08, 2023

FedFin on: GSIB Surcharge

2023-08-23T10:19:58-04:00August 22nd, 2023|The Vault|

As anticipated in the wake of recent bank failures, the FRB has proposed a significant revision to the current rules calculating systemic-risk scores that lead to GSIB designation.  These indicators are used not only for GSIB designation or a higher surcharge, but also for categorizing U.S. and foreign banks for other purposes and thus would also bring some banking organizations into categories subject to very strict prudential standards.  The Board estimates that the overall impact of the changes to the surcharge and risk-scoring methodology are small and, regardless, warranted to enhance systemic resilience and consistency.  It also estimates that the interaction of this new approach with certain liquidity and TLAC standards is generally minimal.  However, the Fed has not assessed the relationship of scoring revisions to one way to calculate the GSIB charges, nor does the Board assess the cumulative impact of all of the changes proposed here in concert with its sweeping revisions to U.S. capital rules for all banking organizations with assets over $100 billion.  It is also unclear how these changes in concert with all the others interact with the stress capital buffer applicable to large U.S.-domiciled banking organizations…

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22 08, 2023

GSIB22

2023-08-22T10:19:26-04:00August 22nd, 2023|1- Financial Services Management|

GSIB Surcharge

As anticipated in the wake of recent bank failures, the FRB has proposed a significant revision to the current rules calculating systemic-risk scores that lead to GSIB designation.  These indicators are used not only for GSIB designation or a higher surcharge, but also for categorizing U.S. and foreign banks for other purposes and thus would also bring some banking organizations into categories subject to very strict prudential standards.  The Board estimates that the overall impact of the changes to the surcharge and risk-scoring methodology are small and, regardless, warranted to enhance systemic resilience and consistency.  It also estimates that the interaction of this new approach with certain liquidity and TLAC standards is generally minimal.  However, the Fed has not assessed the relationship of scoring revisions to one way to calculate the GSIB charges, nor does the Board assess the cumulative impact of all of the changes proposed here in concert with its sweeping revisions to U.S. capital rules for all banking organizations with assets over $100 billion.  It is also unclear how these changes in concert with all the others interact with the stress capital buffer applicable to large U.S.-domiciled banking organizations.  Despite the Fed’s conclusions, it seems likely that the total impact will be considerable in light of methodological problems in this proposal as well as those FedFin identified with the impact analysis for the capital rewrite.

GSIB22.pdf

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