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Electronic Code of Federal Regulations

e-CFR data is current as of March 27, 2020

Title 12Chapter IISubchapter APart 217 → Subpart H


Title 12: Banks and Banking
PART 217—CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)


Subpart H—Risk-based Capital Surcharge for Global Systemically Important Bank Holding Companies


Contents
§217.400   Purpose and applicability.
§217.401   Definitions.
§217.402   Identification as a global systemically important BHC.
§217.403   GSIB surcharge.
§217.404   Method 1 score.
§217.405   Method 2 score.
§217.406   Short-term wholesale funding score.

Authority: 12 U.S.C. 5365.

Source: Reg. Q, 80 FR 49105, Aug. 14, 2015, unless otherwise noted.

§217.400   Purpose and applicability.

(a) Purpose. This subpart implements provisions of section 165 of the Dodd-Frank Act (12 U.S.C. 5365), by establishing a risk-based capital surcharge for global systemically important bank holding companies.

(b) Applicability—(1) General. This subpart applies to a bank holding company that:

(i) Is an advanced approaches Board-regulated institution or a Category III Board-regulated institution;

(ii) Is not a consolidated subsidiary of a bank holding company; and

(iii) Is not a consolidated subsidiary of a foreign banking organization.

(2) Effective date of calculation and surcharge requirements. (i) A bank holding company identified in §217.400(b)(1) is subject to §217.402 of this part and must determine whether it qualifies as a global systemically important BHC by December 31 of the year immediately following the year in which the bank holding company becomes an advanced approaches Board-regulated institution or a Category III Board-regulated institution; and

(ii) A bank holding company that becomes a global systemically important BHC pursuant to §217.402 must calculate its GSIB surcharge pursuant to §217.403 by December 31 of the year in which the bank holding company is identified as a global systemically important BHC and must use that GSIB surcharge for purposes of determining its maximum payout ratio under Table 1 to §217.11 beginning on January 1 of the year that is immediately following the full calendar year after it is identified as a global systemically important BHC.

(c) Reservation of authority. (1) The Board may apply this subpart to any Board-regulated institution, in whole or in part, by order of the Board based on the institution's capital structure, size, level of complexity, risk profile, scope of operations, or financial condition.

(2) The Board may adjust the amount of the GSIB surcharge applicable to a global systemically important BHC, or extend or accelerate any compliance date of this subpart, if the Board determines that the adjustment, extension, or acceleration is appropriate in light of the capital structure, size, complexity, risk profile, and scope of operations of the global systemically important BHC. In increasing the size of the GSIB surcharge for a global systemically important BHC, the Board shall follow the notice and response procedures in 12 CFR part 263, subpart E.

[Reg. Q, 80 FR 49105, Aug. 14, 2015, as amended at 84 FR 59075, Nov. 1, 2019]

§217.401   Definitions.

As used in this subpart:

(a) Aggregate global indicator amount means, for each systemic indicator, the aggregate measure of that indicator, which is equal to the most recent annual dollar figure published by the Board that represents the sum of systemic indicator values of:

(1) The 75 largest global banking organizations, as measured by the Basel Committee on Banking Supervision; and

(2) Any other banking organization that the Basel Committee on Banking Supervision includes in its sample total for that year.

(b) Assets under custody means assets held as a custodian on behalf of customers, as reported by the bank holding company on the FR Y-15.

(c) Average risk-weighted assets means the four-quarter average of the measure of total risk-weighted assets associated with the lower of the bank holding company's common equity tier 1 risk-based capital ratios, as reported on the bank holding company's FR Y-9C for each quarter of the previous calendar year.

(d) Brokered deposit has the meaning set forth in 12 CFR 249.3.

(e) Consolidated subsidiary has the meaning set forth in 12 CFR 249.3.

(f) Covered asset exchange means a transaction in which a bank holding company has provided assets of a given liquidity category to a counterparty in exchange for assets of a higher liquidity category, and the bank holding company and the counterparty agreed to return such assets to each other at a future date. Categories of assets, in descending order of liquidity, are level 1 liquid assets, level 2A liquid assets, level 2B liquid assets, and assets that are not HQLA. Covered asset exchanges do not include secured funding transactions.

(g) Financial sector entity has the meaning set forth in 12 CFR 249.3.

(h) GAAP means generally accepted accounting principles as used in the United States.

(i) High-quality liquid asset (HQLA) has the meaning set forth in 12 CFR 249.3.

(j) Cross-jurisdictional claims means foreign claims on an ultimate risk basis, as reported by the bank holding company on the FR Y-15.

(k) Cross-jurisdictional liabilities means total cross-jurisdictional liabilities, as reported by the bank holding company on the FR Y-15.

(l) Intra-financial system assets means total intra-financial system assets, as reported by the bank holding company on the FR Y-15.

(m) Intra-financial system liabilities means total intra-financial system liabilities, as reported by the bank holding company on the FR Y-15.

(n) Level 1 liquid asset is an asset that qualifies as a level 1 liquid asset pursuant to 12 CFR 249.20(a).

(o) Level 2A liquid asset is an asset that qualifies as a level 2A liquid asset pursuant to 12 CFR 249.20(b).

(p) Level 2B liquid asset is an asset that qualifies as a level 2B liquid asset pursuant to 12 CFR 249.20(c).

(q) Level 3 assets means assets valued using Level 3 measurement inputs, as reported by the bank holding company on the FR Y-15.

(r) Notional amount of over-the-counter (OTC) derivatives means the total notional amount of OTC derivatives, as reported by the bank holding company on the FR Y-15.

(s) Operational deposit has the meaning set forth in 12 CFR 249.3.

(t) Payments activity means payments activity, as reported by the bank holding company on the FR Y-15.

(u) Retail customer or counterparty has the meaning set forth in 12 CFR 249.3.

(v) Secured funding transaction has the meaning set forth in 12 CFR 249.3.

(w) Securities outstanding means total securities outstanding, as reported by the bank holding company on the FR Y-15.

(x) Short position means a transaction in which a bank holding company has borrowed or otherwise obtained a security from a counterparty and sold that security, and the bank holding company must return the security to the initial counterparty in the future.

(y) Systemic indicator includes the following indicators included on the FR Y-15:

(1) Total exposures;

(2) Intra-financial system assets;

(3) Intra-financial system liabilities;

(4) Securities outstanding;

(5) Payments activity;

(6) Assets under custody;

(7) Underwritten transactions in debt and equity markets;

(8) Notional amount of over-the-counter (OTC) derivatives;

(9) Trading and available-for-sale (AFS) securities;

(10) Level 3 assets;

(11) Cross-jurisdictional claims; or

(12) Cross-jurisdictional liabilities.

(z) Total exposures means total exposures as reported by the bank holding company on the FR Y-15.

(aa) Trading and AFS securities means total adjusted trading and available-for-sale securities as reported by the bank holding company on the FR Y-15.

(bb) Underwritten transactions in debt and equity markets means total underwriting activity as reported by the bank holding company on the FR Y-15.

(cc) Unsecured wholesale funding has the meaning set forth in 12 CFR 249.3.

(dd) Wholesale customer or counterparty has the meaning set forth in 12 CFR 249.3.

§217.402   Identification as a global systemically important BHC.

A bank holding company is a global systemically important BHC if its method 1 score, as calculated under §217.404, equals or exceeds 130 basis points. Subject to §217.400(b)(2), a bank holding company must calculate its method 1 score on an annual basis by December 31 of each year.

§217.403   GSIB surcharge.

(a) General. Subject to §217.400(b)(2), a company identified as a global systemically important BHC pursuant to §217.402 must calculate its GSIB surcharge on an annual basis by December 31 of each year. For any given year, subject to paragraph (d) of this section, the GSIB surcharge is equal to the greater of:

(1) The method 1 surcharge calculated in accordance with paragraph (b) of this section; and

(2) The method 2 surcharge calculated in accordance with paragraph (c) of this section.

(b) Method 1 surcharge—(1) General. The method 1 surcharge of a global systemically important BHC is the amount set forth in Table 1 of this section that corresponds to the global systemically important BHC's method 1 score, calculated pursuant to §217.404.

Table 1 to §217.403—Method 1 Surcharge

Method 1 scoreMethod 1 surcharge
Below 1300.0 percent.
130—2291.0 percent.
230—3291.5 percent.
330—4292.0 percent.
430—5292.5 percent.
530—6293.5 percent.

(2) Higher method 1 surcharges. To the extent that the method 1 score of a global systemically important BHC equals or exceeds 630 basis points, the method 1 surcharge equals the sum of:

(i) 4.5 percent; and

(ii) An additional 1.0 percent for each 100 basis points that the global systemically important BHC's score exceeds 630 basis points.

(c) Method 2 surcharge—(1) General. The method 2 surcharge of a global systemically important BHC is the amount set forth in Table 2 of this section that corresponds to the global systemically important BHC's method 2 score, calculated pursuant to §217.405.

Table 2 to §217.403: Method 2 Surcharge

Method 2 scoreMethod 2 surcharge
Below 1300.0 percent.
130—2291.0 percent.
230—3291.5 percent.
330—4292.0 percent.
430—5292.5 percent.
530—6293.0 percent.
630—7293.5 percent.
730—8294.0 percent.
830—9294.5 percent.
930—10295.0 percent.
1030—11295.5 percent.

(2) Higher method 2 surcharges. To the extent that the method 2 score of a global systemically important BHC equals or exceeds 1130 basis points, the method 2 surcharge equals the sum of:

(i) 6.5 percent; and

(ii) An additional 0.5 percent for each 100 basis points that the global systemically important BHC's score exceeds 1130 basis points.

(d) Effective date of an adjusted GSIB surcharge—(1) Increase in GSIB surcharge. An increase in the GSIB surcharge of a global systemically important BHC will take effect (i.e., be incorporated into the maximum payout ratio under Table 1 to §217.11) on January 1 of the year that is one full calendar year after the increased GSIB surcharge was calculated.

(2) Decrease in GSIB surcharge. A decrease in the GSIB surcharge of a global systemically important BHC will take effect (i.e., be incorporated into the maximum payout ratio under Table 1 to §217.11) on January 1 of the year immediately following the calendar year in which the decreased GSIB surcharge was calculated.

§217.404   Method 1 score.

(a) General. A bank holding company's method 1 score is the sum of its systemic indicator scores for the twelve systemic indicators set forth Table 1 of this section, as determined under paragraph (b) of this section.

(b) Systemic indicator score. (1) Except as provided in paragraph (b)(2) of this section, the systemic indicator score in basis points for a given systemic indicator is equal to:

(i) The ratio of:

(A) The amount of that systemic indicator, as reported by the bank holding company as of December 31 of the previous calendar year; to

(B) The aggregate global indicator amount for that systemic indicator published by the Board in the fourth quarter of that year;

(ii) Multiplied by 10,000; and

(iii) Multiplied by the indicator weight corresponding to the systemic indicator as set forth in Table 1 of this section.

(2) Maximum substitutability score. The sum of the systemic indicator scores for the indicators in the substitutability category (assets under custody, payments systems activity, and underwriting activity) will not exceed 100 basis points.

Table 1 to §217.404—Systemic Indicator Weights

CategorySystemic indicatorIndicator weight
SizeTotal exposures20 percent.
InterconnectednessIntra-financial system assets6.67 percent.
   Intra-financial system liabilities6.67 percent.
   Securities outstanding6.67 percent.
SubstitutabilityPayments activity6.67 percent.
   Assets under custody6.67 percent.
   Underwritten transactions in debt and equity markets6.67 percent.
ComplexityNotional amount of over-the-counter (OTC) derivatives6.67 percent.
   Trading and available-for-sale (AFS) securities6.67 percent.
   Level 3 assets6.67 percent.
Cross-jurisdictional activityCross-jurisdictional claims10 percent.
   Cross-jurisdictional liabilities10 percent.

[80 FR 49105, Aug. 14, 2015, as amended at 81 FR 90954, Dec. 16, 2016]

§217.405   Method 2 score.

(a) General. A global systemically important BHC's method 2 score is equal to:

(1) The sum of:

(i) The global systemically important BHC's systemic indicator scores for the nine systemic indicators set forth Table 1 of this section, as determined under paragraph (b) of this section; and

(ii) The global systemically important BHC's short-term wholesale funding score, calculated pursuant to §217.406.

(b) Systemic indicator score. A global systemically important BHC's score for a systemic indicator is equal to:

(1) The amount of the systemic indicator, as reported by the bank holding company as of December 31 of the previous calendar year, expressed in billions of dollars;

(2) Multiplied by the coefficient corresponding to the systemic indicator set forth in Table 1 of this section.

Table 1 to §217.405—Coefficients for Systemic Indicators

CategorySystemic indicatorCoefficient value
(%)
SizeTotal exposures4.423
InterconnectednessIntra-financial system assets12.007
   Intra-financial system liabilities12.490
   Securities outstanding9.056
ComplexityNotional amount of over-the-counter (OTC) derivatives0.155
   Trading and available-for-sale (AFS) securities30.169
   Level 3 assets161.177
Cross-jurisdictional activityCross-jurisdictional claims9.277
   Cross-jurisdictional liabilities9.926

[80 FR 49105, Aug. 14, 2015, as amended at 81 FR 90954, Dec. 16, 2016]

§217.406   Short-term wholesale funding score.

(a) General. Except as provided in §217.400(b)(3)(ii), a global systemically important BHC's short-term wholesale funding score is equal to:

(1) The average of the global systemically important BHC's weighted short-term wholesale funding amount (defined in paragraph (b) of this section);

(2) Divided by the global systemically important BHC's average risk-weighted assets; and

(3) Multiplied by a fixed factor of 350.

(b) Weighted short-term wholesale funding amount. (1) To calculate its weighted short-term wholesale funding amount, a global systemically important BHC must calculate the amount of its short-term wholesale funding on a consolidated basis for each business day of the previous calendar year and weight the components of short-term wholesale funding in accordance with Table 1 of this section.

(2) Short-term wholesale funding includes the following components, each as defined in paragraph (c) of this section:

(i) All funds that the bank holding company must pay under each secured funding transaction, other than an operational deposit, with a remaining maturity of 1 year or less;

(ii) All funds that the bank holding company must pay under all unsecured wholesale funding, other than an operational deposit, with a remaining maturity of 1 year or less;

(iii) The fair value of an asset as determined under GAAP that a bank holding company must return under a covered asset exchange with a remaining maturity of 1 year or less;

(iv) The fair value of an asset as determined under GAAP that the bank holding company must return under a short position to the extent that the borrowed asset does not qualify as a Level 1 liquid asset or a Level 2A liquid asset; and

(v) All brokered deposits held at the bank holding company provided by a retail customer or counterparty.

(3) For purposes of calculating the short-term wholesale funding amount and the components thereof, a bank holding company must assume that each asset or transaction described in paragraph (b)(2) of this section matures in accordance with the criteria set forth in 12 CFR 249.31.

Table 1 to §217.406—Short-Term Wholesale Funding Components and Weights

Component of short-term wholesale fundingRemaining
maturity of
30 days of less
or no maturity
Remaining
maturity of
31 to 90 days
Remaining
maturity of
91 to 180 days
Remaining
maturity of
181 to 365 days
Category 125 percent10 percent0 percent0 percent.
(1) Secured funding transaction secured by a level 1 liquid asset;
(2) Unsecured wholesale funding where the customer or counterparty is not a financial sector entity or a consolidated subsidiary thereof;
(3) Brokered deposits provided by a retail customer or counterparty; and
(4) Short positions where the borrowed asset does not qualify as either a level 1 liquid asset or level 2A liquid asset.
Category 250 percent25 percent10 percent0 percent.
(1) Secured funding transaction secured by a level 2A liquid asset; and
(2) Covered asset exchanges involving the future exchange of a Level 1 liquid asset for a Level 2A liquid asset.
Category 375 percent50 percent25 percent10 percent.
(1) Secured funding transaction secured by a level 2B liquid asset;
(2) Covered asset exchanges (other than those described in Category 2); and
(3) Unsecured wholesale funding (other than unsecured wholesale funding described in Category 1).
Category 4100 percent75 percent50 percent25 percent.
Any other component of short-term wholesale funding.

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