The Board of Governors of the Federal Reserve System ("FRB") proposal to simplify the capital requirements for large banks was published in the Federal Register. As previously covered, the proposal would revise the capital and stress test rules for bank holding companies with more than $50 billion in total consolidated assets.
The proposal would establish a "stress capital buffer" ("SCB") requirement for large banking organizations, with the goal of producing a "tailored and risk-sensitive capital regime." According to the FRB, the proposed changes would (i) maintain or increase the capital required for global systemically important banks ("GSIBs") and (ii) decrease the capital required for non-GSIBs. The FRB does not expect that the proposed changes would obligate firms to raise additional capital.
The proposal also applies to the U.S. intermediate holding companies of foreign banking organizations established under Regulation YY, and any non-bank financial company that becomes subject to the capital planning requirements.
The FRB is seeking comments on the proposal that must be received by June 25, 2018. If adopted, the proposal would become effective on December 31, 2018, and the first stress capital buffer and stress leverage buffer requirements for entities would be effective generally on October 1, 2019.
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