This story appeared in Bank Digest.
As part of its July 20, 2015, open meeting, the Federal Reserve Board approved a final rule that imposes a capital surcharge on the largest, most systemically important U.S. bank holding companies pursuant to Section 165 of the Dodd-Frank Act. Under the final rule, a firm that is identified as a global systemically important bank holding company, or GSIB, will have to hold additional capital to increase its resiliency in light of the greater threat it poses to the financial stability of the United States.
The final rule is the result of a December 2014 proposed rule that was based upon the international standard adopted by the Basel Committee on Banking Supervision and is augmented to address risks to U.S. financial stability. As in the proposal, the Fed's final rule would use five broad categories correlated with systemic importance--size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity--to calculate a numerical score that would be used to determine whether a U.S. bank holding company would be identified as a GSIB.
The capital surcharge will be phased in beginning on Jan. 1, 2016, and would become fully effective on Jan. 1, 2019, on the same implementation timeline as the Fed's capital conservation buffer.