The Federal Reserve is considering adjusting the calculation rules for GSIB surcharges, which could save banks a significant amount of capital.

Four informed sources revealed that the Federal Reserve is considering a rule change that could save billions of dollars in capital for the eight largest banks in the United States, a long-awaited victory for the banking industry. The issue at hand is how the Federal Reserve calculates the additional capital charged to Global Systemically Important Banks (GSIB), known as the ‘GSIB surcharge’. This surcharge was introduced by the Federal Reserve in 2015 to enhance the safety and soundness of these banks. Sources say the Federal Reserve is considering updating its calculation methodology established in 2015 to better reflect the banks’ relative scale to the global economy, in line with the rise in the economy. Insiders state that updating these inputs or ‘coefficients’ will lower the banks’ systemic scores and the resulting capital surcharges. According to the Federal Reserve’s data, the total capital held by US GSIBs due to surcharges is estimated to be around $230 billion in the first quarter of 2024, indicating that even minor changes could result in significant savings for some banks.