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How Do Global Systemically Important Banks Lower Capital Surcharges?

Author

Listed:
  • Jared Berry

    (Morning Consult)

  • Akber Khan

    (Morning Consult)

  • Marcelo Rezende

    (Federal Reserve Board)

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.

Suggested Citation

  • Jared Berry & Akber Khan & Marcelo Rezende, 2025. "How Do Global Systemically Important Banks Lower Capital Surcharges?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 67(3), pages 73-99, June.
    • Handle: RePEc:kap:jfsres:v:67:y:2025:i:3:d:10.1007_s10693-024-00426-w
    DOI: 10.1007/s10693-024-00426-w
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    More about this item

    Keywords

    Bank capital requirements; GSIB surcharges; Systemic importance; Basel III;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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