49082 Federal Register / Vol. 80, No. 157 / Friday, August 14, 2015 / Rules and Regulations FEDERAL RESERVE SYSTEM Governors of the Federal Reserve holding companies and nonbank System, 20th and C Streets NW., financial companies.3 12 CFR Parts 208 and 217 Washington, DC 20551. For the hearing B. Overview of the Proposed Rule [Regulations H and Q; Docket No. R–1505] impaired only, Telecommunications Device for the Deaf (TDD) users may RIN 7100 AE–26 In December 2014, the Board invited contact (202) 263–4869. public comment on a notice of proposed Regulatory Capital Rules: SUPPLEMENTARY INFORMATION: rulemaking (proposal) to identify global Implementation of Risk-Based Capital systemically important bank holding Table of Contents Surcharges for Global Systemically companies (GSIBs) and impose a risk- Important Bank Holding Companies I. Introduction based capital surcharge on those A. The Dodd-Frank Act institutions (GSIB surcharge).4 The AGENCY: Board of Governors of the B. Overview of the Proposed Rule proposal established a methodology to Federal Reserve System. C. Integrated Set of Prudential Standards identify whether a U.S. top-tier bank ACTION: Final rule. D. Interaction with the Global Framework holding company with total II. Description of the Final Rule consolidated assets of $50 billion or SUMMARY: The Board of Governors of the A. Identification of a GSIB Federal Reserve System is adopting a more is a GSIB. The proposed B. Source of Systemic Indicator methodology was based on five broad final rule that establishes risk-based Information capital surcharges for the largest, most categories that are correlated with C. Computing the Applicable GSIB systemic importance—size, interconnected U.S.-based bank holding Surcharge companies pursuant to section 165 of interconnectedness, cross-jurisdictional D. Augmentation of the Capital activity, substitutability, and the Dodd-Frank Wall Street Reform and Conservation Buffer complexity. A bank holding company Consumer Protection Act. The final rule E. Implementation and Timing requires a U.S. top-tier bank holding III. Indicators of Global Systemic Risk would determine a score in each company that is an advanced A. Size category based on its firm-specific approaches institution to calculate a B. Interconnectedness systemic indicators within each measure of its systemic importance. A C. Substitutability category relative to aggregate global bank holding company whose measure D. Complexity indicator amounts across other large, of systemic importance exceeds a E. Cross-jurisdictional Activity global banking organizations. Each defined threshold would be identified F. Use of Short-term Wholesale Funding category would be given a 20 percent as a global systemically important bank IV. Amendments to the FR Y–15 weighting in the calculation of a firm’s holding company and would be subject V. Modifications to Related Rules aggregate systemic indicator score to a risk-based capital surcharge (GSIB VI. Regulatory Analysis (together, the method 1 score). A bank surcharge). The GSIB surcharge is A. Paperwork Reduction Act holding company whose method 1 score B. Regulatory Flexibility Act Analysis phased in beginning on January 1, 2016, exceeded a defined threshold would be C. Plain Language through year-end 2018, and becomes identified as a GSIB. fully effective on January 1, 2019. The I. Introduction A firm identified as a GSIB would final rule also revises the terminology then calculate its GSIB surcharge under A. The Dodd-Frank Act used to identify the bank holding two methods and would be subject to companies subject to the enhanced Section 165 of the Dodd-Frank Wall the higher of the two. The first method supplementary leverage ratio standards Street Reform and Consumer Protection was the same methodology for to ensure consistency in the scope of Act (Dodd-Frank Act) directs the Board identifying a bank holding company as application between the enhanced to establish enhanced prudential a GSIB (method 1). The second method supplementary leverage ratio standards standards for bank holding companies was based on the same systemic and the GSIB surcharge framework. with $50 billion or more in total indicator scores used in method 1, DATES: The final rule is effective consolidated assets and for nonbank except that the substitutability score December 1, 2015, except that financial companies that the Financial was replaced by a measure of the firm’s amendatory instructions 2, 3, 6, 8, and Stability Oversight Council (Council) use of short-term wholesale funding 10 amending 12 CFR 208.41, 208.43, has designated for supervision by the (method 2).5 Method 2 surcharges were 217.1, 217.2, and 217.11 are effective Board (nonbank financial companies calibrated to better address the risks January 1, 2018. supervised by the Board).1 These posed by these firms to U.S. financial FOR FURTHER INFORMATION CONTACT: standards must include risk-based stability. The GSIB surcharge was added Anna Lee Hewko, Deputy Associate capital requirements as well as other to a GSIB’s capital conservation buffer Director, (202) 530–6260, Constance M. enumerated standards. They must be for purposes of the regulatory capital Horsley, Assistant Director, (202) 452– more stringent than the standards rule.6 It would have been phased in 5239, Juan C. Climent, Manager, (202) applicable to other bank holding beginning on January 1, 2016, through 872–7526, Jordan Bleicher, Senior companies and to nonbank financial Supervisory Financial Analyst, (202) companies that do not present similar 3 See 12 U.S.C. 5365(a)(1)(B). Under section 973–6123, Holly Kirkpatrick Taylor, risks to U.S. financial stability.2 These 165(a)(1)(B) of the Dodd-Frank Act, the enhanced Supervisory Financial Analyst, (202) standards must also increase in prudential standards must increase in stringency based on the considerations listed in section 452–2796, or Mark Savignac, Senior stringency based on several factors, 165(b)(3). Financial Analyst, (202) 475–7606, including the size and risk 4 79 FR 75473 (December 18, 2014). Division of Banking Supervision and characteristics of a company subject to 5 The fact that method 2 likely produced a higher Regulation; or Laurie Schaffer, Associate the rule, and the Board must take into surcharge than method 1 derives from the General Counsel, (202) 452–2272, account the differences among bank difference in the calibration of these two methods. To allow comparability between scores produced Christine Graham, Counsel, (202) 452– under method 1 and method 2, method 2 raw scores 3005, or Mark Buresh, Attorney, (202) 1 See 12 U.S.C. 5365. were doubled. 452–5270, Legal Division. Board of 2 See 12 U.S.C. 5365(a)(1)(A). 6 See 12 CFR 217.11. VerDate Sep<11>2014 21:17 Aug 13, 2015 Jkt 235001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\14AUR3.SGM 14AUR3 asabaliauskas on DSK5VPTVN1PROD with RULES Federal Register / Vol. 80, No. 157 / Friday, August 14, 2015 / Rules and Regulations 49083 year-end 2018, and become fully Board has adopted under section 165 of to capital requirements, section 165 of effective on January 1, 2019. the Dodd-Frank Act will result in a the Dodd-Frank Act directs the Board to The Board received 21 public more stringent regulatory regime is adopt enhanced risk-based capital comments on the proposed rule from designed to mitigate risks to U.S. standards that mitigate the systemic risk banking organizations, trade financial stability, and include measures of these firms. For reasons discussed associations, public interest advocacy that increase the resiliency of these below, adopting a GSIB surcharge groups, and private individuals. Some companies and reduce the impact on addresses the systemic risk of GSIBs by commenters also met with Board staff to U.S. financial stability were these firms making these firms more resilient. discuss the proposal.7 While some to fail. The final rule works to mitigate the D. Interaction with the Global commenters expressed support for Framework higher capital standards for the largest potential risk that the material financial and most complex U.S. banking distress or failure of a GSIB could pose The final rule is aligned with global organizations, several commenters to U.S. financial stability by increasing efforts to address the financial stability criticized specific aspects of the the stringency of capital standards for risks posed by the largest, most proposal. For instance, several GSIBs, thereby increasing the resiliency interconnected financial institutions. In commenters expressed concern of these firms. The final rule takes into 2011, the Basel Committee on Banking regarding the calibration of the GSIB consideration and reflects the nature, Supervision (BCBS) adopted a surcharges. Other commenters argued scope, size, scale, concentration, framework to identify global that the proposed calculation interconnectedness, and mix of the systemically important banking methodology would limit the ability of activities of each company, as directed organizations and assess their systemic 15 a firm to reduce its GSIB surcharge by by section 165 of the Dodd-Frank Act.12 importance (BCBS framework). The reducing its systemic risk profile. In These factors are reflected in the BCBS applies its methodology and addition, several commenters provided method 1 and method 2 scores, which releases a list of global systemically use quantitative metrics to measure the important banking organizations on an views on the proposed measure of short- 16 term wholesale funding. impact of