Tax & Finance

Regulatory Capital Rule (Regulation Q): Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies; Systemic Risk Report (FR Y-15)

🇺🇸United States··Proposed Rule·High Impact·View source ↗

AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.

🇬🇧 English

The Federal Reserve Board is proposing amendments to Regulation Q, which governs risk-based capital surcharges for U.S. Global Systemically Important Bank Holding Companies (GSIBs). The proposal targets the Method 2 calculation framework for GSIB surcharges, updating key coefficients to better reflect current economic realities and introducing automatic annual adjustments for real GDP growth and inflation — a significant structural change from the current static methodology. The proposal addresses measurement distortions by shifting certain systemic indicators from single-date snapshots to average-value measurements across multiple dates, reducing incentives for banks to temporarily window-dress their balance sheets around measurement dates. It also modifies the weighting and measurement of the weighted short-term wholesale funding (wSTWF) systemic indicator, which captures a bank's reliance on potentially volatile short-term funding sources. Additional changes reduce cliff effects in the surcharge framework — where small changes in a bank's systemic risk score could trigger large discrete jumps in required capital — replacing them with a smoother, more granular surcharge schedule. This enhances proportionality between a GSIB's actual systemic risk profile and its capital requirements. Finally, the proposal includes amendments to the FR Y-15 Systemic Risk Report to improve data consistency and streamline the reporting process. Public comment is being invited, meaning the rule is not yet finalized.

AI-generated summary. May contain errors. Refer to official sources for legal decisions.

Key Changes

  • Method 2 GSIB surcharge coefficients will be updated to reflect current financial system and economic conditions, with annual automatic adjustments for real GDP growth and inflation going forward
  • Weighted short-term wholesale funding (wSTWF) systemic indicator measurement and weighting will be modified to better capture short-term funding risk
  • Certain systemic indicators currently measured on a single annual date will shift to average-value measurement across multiple dates, reducing window-dressing incentives

+ 3 more changes with Pro

Obligations

What this law requires

high

U.S. GSIBs must recalculate risk-based capital surcharges under Method 2 using updated coefficients that reflect changes in the financial system and economy, as specified in the amended Regulation Q framework

U.S. Global Systemically Important Bank Holding Companies (GSIBs)
operational
high

U.S. GSIBs must implement annual automatic adjustments to GSIB surcharge coefficients for real GDP growth and inflation in accordance with the methodology established in the amended rule

U.S. Global Systemically Important Bank Holding Companies (GSIBs)
operational
high

U.S. GSIBs must measure specified systemic indicators based on average values across multiple dates rather than single-date snapshots as currently required under existing Regulation Q

U.S. Global Systemically Important Bank Holding Companies (GSIBs)
operational
high

U.S. GSIBs must measure and weight the weighted short-term wholesale funding (wSTWF) systemic indicator according to the modified methodology specified in the amended Regulation Q

U.S. Global Systemically Important Bank Holding Companies (GSIBs)
operational
high

U.S. GSIBs must report systemic risk data on the FR Y-15 Systemic Risk Report using updated data definitions and measurements that align with amended Regulation Q requirements

U.S. Global Systemically Important Bank Holding Companies (GSIBs)
reporting

Affected Parties

U.S. Global Systemically Important Bank Holding Companies (GSIBs) — currently includes JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, State StreetFederal Reserve supervisory and regulatory staff responsible for GSIB surcharge calculations+4 more…

Tags

GSIB surcharge,Regulation Q,bank capital requirements