Systemic Risk Council Congratulates Federal Reserve Board on Finalizing the G-SIB Capital Surcharge

In response to today’s action by the Federal Reserve Board to unanimously approve its proposed “capital surcharge” on the nation’s largest financial institutions, Sheila Bair, chair of the Systemic Risk Council, issued the following statement:

“It is gratifying to see that the Governors of the Federal Reserve Board have moved ahead with final rules imposing tougher risk-based capital requirements on the nation’s largest institutions. Though the Systemic Risk Council continues to have serious concerns about the complexity of the risk-based rules, and their over-reliance on the banks’ own internal models, we applaud the Governors for imposing a surcharge up to 4.5 percent higher than the current 7 percent requirement and congratulate the Federal Reserve for holding firm against industry efforts to significantly weaken its original, proposed rule. We also note that international regulators agreed to impose a so-called ‘SIFI’ or ‘G-SIB’ surcharge on the world’s largest banks in 2010.  Yet the U.S. is the only jurisdiction to propose and finalize such a rule, which is higher than the standard contained in the 2010 international agreement. We hope the Federal Reserve will continue to work with other bank regulators to simplify the risk-based capital rules and make them less reliant on the banks’ own risk management systems. That said, this is a significant step in strengthening the current capital regime for large institutions, and we applaud the Governors for taking it.”