G-SIBs Must ‘Hold Substantially More Capital’ Or ‘Shrink’ Says Yellen

The Federal Reserve has finalized its rule for identifying global systemically important banks (G-SIBS) and it expects eight US banks to have G-SIB capital surcharges ranging from 1.0% to 4.5% once the rule is fully implemented in 2019. If the rule were to be implemented immediately Bank of America, The Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street and Wells Fargo would all be designated as G-SIBs, with no other US bank coming particularly close.

“In practice, this final rule will confront these firms with a choice: they must either hold substantially more capital, reducing the likelihood that they will fail, or else they must shrink their systemic footprint, reducing the harm...