WASHINGTON — U.S. bank holding companies with assets of more than $50 billion could face a "modest" capital surcharge, according to a top Federal Reserve Board official.
Testifying before the Senate Banking Committee on Tuesday, Fed Gov. Daniel Tarullo said a surcharge could be applied to U.S. firms who meet the cut off imposed by Dodd-Frank, even if they are not on the list of globally systemic banks. The international Basel Committee on Banking Supervision has already said it will add a surcharge on globally significant firms, including the top 8 U.S. banks.
The comments by Tarullo signaled that the Fed will also levy a charge against the 25 other banking companies with more than $50 billion of assets. The central bank is required to impose more stringent capital requirements on such firms to enhance the safety of the financial system. The hearing marked the first time, however, that a Fed official hinted such additional capital requirements could come in the form of a surcharge.
Still, Tarullo told lawmakers that no final decisions have been made by the Fed.
"No decision has yet been made as to whether the more stringent capital requirement to be applied to large U.S. banking firms that are not on the eventual list of global systemic banks will be in the form of a quantitative surcharge," Tarullo said in prepared testimony.
Any surcharge the Fed could apply to these holding companies, he said, would be "quite modest."
Last month, the Financial Stability Board publicly named the 29 global firms deemed systemically important which will now face a capital surcharge. Firms will have to hold between 1% to 2.5% in extra capital depending on a bank's size, riskiness and interconnectedness. No surcharges have been assigned to any of the institutions, yet.
Of the firms named on the initial list, the eight U.S. institutions were: Bank of America Corp., Bank of New York Mellon, Citigroup Inc., Goldman Sachs, JPMorgan Chase & Co., Morgan Stanley, State Street, and Wells Fargo.