The U.S. Federal Reserve is currently considering a significant rule change that could save the country's eight largest banks billions of dollars in capital. This potential adjustment involves updating the inputs used in the calculation of the Global Systemically Important Bank (GSIB) surcharge, which imposes an extra layer of capital on these banks to enhance their safety and soundness. The Fed is contemplating changes to better reflect the banks' size relative to the global economy, which could lead to substantial savings—potentially over $8 billion each for major banks like JPMorgan and Bank of America if the surcharge is reduced by 0.5% [7b0f1dbf].
In a related development, on September 10, 2024, Michael Barr, the U.S. Federal Reserve Vice Chair for Supervision, announced adjustments to proposed banking regulations that initially aimed to raise capital requirements for banks with at least $100 billion in assets. The original proposal suggested a 19% increase in capital for GSIBs, which has now been reduced to 9%. Other large banks may see a capital increase of 3-4%, while smaller banks with assets between $100-$250 billion might only need to account for unrealized gains and losses. These adjustments were made in response to industry criticism regarding the financial burden of the proposed capital increases [8badfa63].
The Fed's willingness to review the GSIB surcharge is viewed as a significant step forward for the campaign to reduce capital requirements among the largest banks. The potential savings for these institutions depend on their respective business models, and any changes would require agreement from other regulators. If the Fed decides to modify the coefficients used in the surcharge calculation, it would likely repropose the rule for additional public feedback, potentially delaying a final decision by several months [b28c8e82].