How Do Global Systemically Important Banks Lower Capital Surcharges?

Jared Berry (), Akber Khan () and Marcelo Rezende ()
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Jared Berry: Morning Consult
Akber Khan: Morning Consult
Marcelo Rezende: Federal Reserve Board

Journal of Financial Services Research, 2025, vol. 67, issue 3, No 1, 73-99

Abstract: Abstract Global systemically important banks (GSIBs) are subject to capital surcharges that increase with systemic importance indicators. We show that U.S. GSIBs lower their surcharges to a large extent by reducing one indicator—the notional amount of over-the-counter derivatives—in the fourth quarter of each year, the quarter that determines surcharges. This seasonal drop is stronger at GSIBs than at other banks, it increased after GSIB surcharges were introduced, and it is largely driven by interest rate swaps. We discuss implications of these results for the design of systemic importance indicators.

Keywords: Bank capital requirements; GSIB surcharges; Systemic importance; Basel III (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10693-024-00426-w

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