March 2019 issue contents
Are Basel's Capital Surcharges for Global Systemically Important Banks Too Small?

Wayne Passmore and Alexander H. von Hafften
Federal Reserve Board


The Basel Committee promulgates bank regulatory standards, including capital surcharges for global systemically important banks (G-SIBs). Our analysis suggests that the Basel III capital surcharge framework underestimates the probability of bank failure, wrongly disregards short-term funding, and excludes too many banks; our baseline estimate suggests surcharges should increase 3.00 to 8.25 percentage points and that even higher surcharges should apply to G-SIBs that rely on short-term funding. Our findings, which do not account for Basel III beyond the capital surcharges, may differ from the findings of a comprehensive analysis of Basel III.

JEL Code: G01, G18, G21.

Full article (PDF, 52 pages, 2,832 kb)