The Board of Governors of the Federal Reserve System ("FRB") requested comments on proposed rules that would simplify the capital requirements for large banks. The proposal would revise the capital and stress test rules for bank-holding companies with more than $50 billion in total consolidated assets.
If adopted, 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." The SCB would be calculated based on the results of a firm's annual stress test. The number of capital requirements that large firms are required to meet would be reduced from 24 to 14.
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 U.S. intermediate holding companies of foreign banking organizations established under Regulation YY and any nonbank financial company that becomes subject to the capital planning requirements. (At present, no FRB-supervised nonbank financial companies are subject to such requirements.)
The FRB is requesting comments on all aspects of the proposed changes. Comments must be received within 60 days of publication of the FRB notice in the Federal Register. 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 generally be effective on October 1, 2019.
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