Clash of titans: GSIB proposal pits megabank against megabank

• Key takeaway: JPMorganChase and Bank of America objected to the proposed removal of risk-weighted assets from the denominator of the short-term wholesale funding component of the GSIB surcharge, arguing the change could distort how regulators measure a bank's reliance on short-term wholesale funding. 
• Expert quote: "The removal of the [short-term wholesale funding] denominator causes the proposal to affect firms unevenly. Utilizing gross STWF with no denominator may overstate risk for a larger firm with lower relative reliance on STWF." — Alastair Borthwick, chief financial officer at Bank of America.
• What's at stake: Despite disagreements over certain aspects of the GSIB and Basel III proposals, banks urged prudential regulators to move quickly to finalize the rules.

The nation's largest banks are divided over proposed changes to the Federal Reserve's capital surcharge proposal for global systemically important banks, with one of the biggest disagreements centered on how regulators calculate short-term wholesale funding. 

In separate comment letters submitted June 18, JPMorganChase and Bank of America said the central bank did not provide sufficient justification for removing risk-weighted assets from the denominator of the short-term wholesale funding component of the GSIB surcharge. The banks argued the change could distort how reliance on short-term wholesale funding is measured and produce uneven outcomes across the largest U.S. banks. "The removal of the STWF denominator causes the proposal to affect firms unevenly," wrote Alastair Borthwick, chief financial officer at Bank of America. "Utilizing gross STWF with no denominator may overstate risk for a larger firm with lower relative reliance on STWF."

The concerns were not shared by the nation's two largest investment banks. Goldman Sachs and Morgan Stanley, in their own separate comment letters, backed the proposed revisions, arguing the changes would improve the accuracy of the GSIB surcharge by better aligning the short-term wholesale funding measure.

The commentary letter from Goldman Sachs argues that the legacy methodology pairs two unrelated measures and therefore fails to accurately assess a bank's reliance on short-term wholesale funding.

"Because there is no correlation between STWF and [risk-weighted assets], retaining RWA in the denominator would cause the STWF indicator to drift out of balance over time," Goldman Sachs' commentary reads. "Eliminating RWA from the denominator would result in a more transparent and economically grounded measure of reliance on STWF."

The comment letters came in response to a package of proposed rules released in March by U.S. banking regulators aimed at revising capital requirements. The proposals include changes to the implementation of remaining Basel III standards, revisions to the GSIB surcharge framework and updates to the standardized approach for calculating regulatory capital requirements. 

While Bank of America acknowledged that the GSIB surcharge calculation could be improved, it argued that removing the denominator without replacing it could disadvantage certain firms. Bank of America suggested replacing risk-weighted assets with adjusted average assets, saying the alternative would produce "more consistent results across firms." Chase argued for keeping the risk-weighted assets denominator, saying the methodology change could require GSIBs to hold more capital against short-term wholesale funding and increase costs for consumers through higher capital requirements. Despite their differences over the STWF calculation, all four banks urged the Fed to update its Method 2 GSIB surcharge formula to account for economic growth and inflation since the framework was established. 

"Absent such adjustments, firms may be penalized for balance sheet growth that merely reflects broader economic expansion rather than an increase in systemic footprint," Goldman Sachs wrote in its letter.

Some analysts expect regulators to maintain most of the proposed changes to GSIB and Basel III, while making some targeted changes in response to industry feedback.

Minimum capital requirements

Basel, G-SIB proposals lower bank capital across the board

March 19, 2026 9:46 AM

By John Heltman

One potential change could involve the definition of "commitment" in the Basel III proposal. Banks have argued the revised definition is too broad and creates uncertainty over which potential lending arrangements require additional capital.

A joint letter from banking trade groups, including the Bank Policy Institute and the American Bankers Association, said the proposed definition "introduces substantial ambiguity and increases the likelihood of inconsistent application across firms."

The change could have varying effects across the banking industry. Large banks could face higher capital requirements because of an expanded risk base, while midsize banks could see effects through the standard leverage ratio. Smaller banks could also face additional reporting requirements under the broader definition.

Though there are divisions over certain elements of the proposal, banks have generally supported the GSIB surcharge and Basel III endgame changes, viewing them as a significant improvement over former Federal Reserve Vice Chair for Supervision Michael Barr's 2023 proposal. Bank comment letters urged regulators to move quickly toward finalizing the rules. 

"We went from huge issues of mid to high teens capital increase to now we're arguing over the wording of things on the margin," said Ed Mills, a managing director at Raymond James in a previous interview. "That shows you how far this has come."