Capital
G-SIB Surcharge
The G-SIB Surcharge is an additional CET1 capital requirement applied to Global Systemically Important Banks (G-SIBs). The eight US G-SIBs face surcharges ranging from 1.0% to 4.5% on top of the standard capital framework.
Formula
The Federal Reserve assigns each G-SIB a score based on size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity. Higher scores produce higher surcharges. Method 2 (using a substitute reliance-on-short-term-wholesale-funding indicator) is generally the binding calculation for US G-SIBs.
Why it matters
The surcharge is the regulatory premium for being 'too big to fail.' JPMorgan Chase, the largest US G-SIB, faces a 4.5% surcharge — its effective CET1 minimum is 11.5% before any stress capital buffer. The surcharge is a direct counterweight to the implicit funding subsidy that comes from being a G-SIB.
How to interpret
G-SIB surcharges are republished annually by the Federal Reserve. Movement between buckets is rare but newsworthy. The total effective CET1 floor for a US G-SIB is the 7% (4.5% min + 2.5% CCB) baseline plus the surcharge — typically 8.5-11.5% before stress buffer.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| 0% | Non-G-SIB | Standard capital framework only. |
| 1.0–2.0% | Bucket 1-2 | Lower-tier G-SIBs (BoNY, State Street, Wells, BAC, GS, Morgan Stanley, Citi). |
| 2.5–3.5% | Bucket 3-4 | Mid-tier G-SIBs. |
| 4.0–4.5% | Bucket 5 | Largest G-SIB (JPMorgan Chase, US bucket). |
Worked example
Frequently asked
Which US banks are G-SIBs?
Eight: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, and State Street.
Why is JPM's surcharge higher than the others?
JPMorgan scores highest across most of the five systemic-importance indicators (size, complexity, interconnectedness, etc.), placing it in the highest US bucket.
Does the G-SIB surcharge change over time?
Yes. The Federal Reserve publishes scores annually and a G-SIB can move between buckets as its size and complexity shift. The 2024 framework proposal would have slightly recalibrated several US G-SIBs upward; the final rule is still pending.
Sources
- 12 CFR §217.402-404 — Federal Reserve Method 1 and Method 2 G-SIB scoring
- Annual Federal Reserve G-SIB surcharge publication
See G-SIB Surcharge across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by G-SIB Surcharge, refreshed quarterly within 48 hours of FFIEC release.