​ABA to Fed: Basis for G-SIB Capital Surcharge Is Unclear

The Federal Reserve should withdraw its proposed capital surcharge for the largest U.S.-based global systemically important banks, ABA said in a comment letter Friday. The association noted that the plan, which would require substantially higher capital levels for G-SIBs than those required by Basel III, relies too much on “non-transparent information” held by the Basel Committee on Banking Supervision.

“The proposed new capital regime, developed in less than open deliberations by the global experts at the Basel Committee, remains relatively unexposed in its foundations and methodology to public light by the [Fed] Board, even while the Board proposes to apply substantially heavier requirements on U.S. banks than are being applied internationally,” ABA said. “[I]t is important that new capital regimes, particularly those developed outside of the United States, be given the fullest public exposure to ensure consistency with recent reforms and the needs of the U.S. economy.”

As proposed, the surcharge would currently apply to the eight U.S. G-SIBs as designated by the Basel, Switzerland-based Financial Stability Board. However, the rule would require U.S. banks with more than $50 billion in assets to calculate a measure of their potential significance. The proposal also includes methods of calculating the surcharges that would result in capital surcharges ranging from 1 percent to 4.5 percent of total risk-weighted assets. For more information, contact ABA’s Hugh Carney.