Fed should go back to drawing board on capital surcharge, banks say

15 August 2018 9:35am
The US Federal Reserve should reassess its design of the capital surcharge for the eight largest banks now that it is due to be combined with stress test results in determining a firm’s capital requirements, banking groups said.

The surcharge, which is supposed to reflect the added threat to financial stability posed by a large bank, is miscalibrated, disadvantages US firms and fails to take into account firms’ improved resiliency in recent years, according to both the groups and chief executives of the biggest banks.

“Addressing these flaws is important not only to establish greater confidence in the Federal Reserve’s capital and stress testing framework but also to create a precedent for global regulatory capital standards,” said The Clearing House and other banking associations.