WASHINGTON — Echoing House colleagues who raised similar concerns earlier this week, five Republican senators on Thursday called on the Federal Reserve Board to rethink the central bank's capital surcharge for the biggest banks.

The senators — including Pat Toomey, R-Pa., who some speculate could chair the Senate Banking Committee in 2019 — said the Fed should adjust the surcharge for global systemically important banks in order to eliminate “excessive” capital requirements.

They said the surcharge could hinder the U.S. financial system’s competitiveness.

Senator Patrick Toomey.
The senators, including Pat Toomey, R-Pa., said the Fed should adjust the surcharge for Globally Systemically Important Banks in order to eliminate “excessive” capital requirements. Bloomberg News

“In addition to the burden on U.S. economic growth and job creation, the current approach potentially causes long-term, unnecessary competitive concerns for the U.S. financial system,” they said in the letter addressed to Fed Chairman Jerome Powell. Also signing on to the letter were Sens. Mike Rounds, R-S.D., Tim Scott, R-S.C., Thom Tillis, R-N.C., and David Perdue, R-Ga.

They argued that the surcharge in its current form is unnecessary in light of post-crisis financial changes that “clearly reduce systemic risk.”

The letter came three days after 29 House Republicans brought up the issue in their own letter to Randal Quarles, the Fed's vice chairman of supervision.

The surcharge requires the eight U.S. G-SIBs — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, Goldman Sachs, State Street and BNY Mellon — to apply an additional 1%-4.5% to their minimum capital requirements. The size of the surcharge depends on a number of factors, such as size, risk, complexity and reliance on short-term wholesale funding.

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