Fed sets 2019 global indicator amounts for GSIBs

In case you were wondering, the 2019 global indicator amounts used by global systemically important bank holding companies (GSIBs) under a risk-based capital surcharge rule were revised in December by the Federal Reserve Board.

The new amounts took effect Dec. 19 under the Fed’s Regulation Q.

The Fed Board’s GSIB surcharge rule establishes a methodology to identify global systemically important bank holding companies in the United States based on indicators that are correlated with systemic importance. Under the GSIB surcharge rule, a firm must calculate its GSIB score using a specific formula, Method 1. Method 1 uses five equally weighted categories that are correlated with systemic importance – size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity – and subdivided into 12 systemic indicators.

For each indicator, a firm divides its own measure of each systemic indicator by an aggregate global indicator amount. A firm’s Method 1 score is the sum of its weighted systemic indicator scores expressed in basis points. The GSIB surcharge for a firm is the higher of the GSIB surcharge determined under Method 1 and a second method, Method 2, which weights size, interconnectedness, cross-jurisdictional activity, complexity, and a measure of a firm’s reliance on wholesale funding (instead of substitutability).

The aggregate global indicator amounts used in the score calculation under Method 1 are based on data collected by the Basel Committee on Banking Supervision (BCBS). To get the new amounts, the Fed Board multiplied each of the euro-denominated indicator amounts made publicly available by the BCBS by 1.1450, which was the daily euro to U.S. dollar spot rate as of Dec. 31, 2018.

The aggregate global indicator amounts for purposes of the 2019 Method 1 score calculation are shown in the table below.

From: Federal Register

Regulation Q; Regulatory Capital Rules: Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies