“So assuming the Basel III endgame and GSIB proposals are finalized in their current form, we would see a 45% increase in our capital requirements relative to that 2017 starting point.”

In context

“operational risk and its clear overlap with op risk losses already capitalized through the stress capital Buffer. Although there is limited disclosure from the Fed on this point, we have estimated that we have about $15 billion of operational risk capital embedded in the SCB based on the information the Fed does disclose. Once we capitalize for this new op risk RWA, our required capital will go up by around $30 billion without any change to our portfolio. Now let's turn to Page 5, which shows the impact of the actual and proposed capital rules over the last few years. Zooming out from the details of this most recent proposal, this page reminds us of what's happened since 2017. Since then, SA-CCR and the stress capital buffer have been adopted and our GSIB surcharge will increase to 4.5%. So assuming the Basel III endgame and GSIB proposals are finalized in their current form, we would see a 45% increase in our capital requirements relative to that 2017 starting point. This illustrates again how overcalibrated these proposals are and it's not done yet. We still expect the Fed to incorporate CECL into CCAR, which will likely increase the SCB. And, of course, given the absence of a fix to the GSIB clause, it continues to present a headwind into the indefinite future. And aside from those dynamics, there remains the long-standing issue of procyclicality in the overall capital [Technical Difficulty]. We think it's also important to point out that the agencies did actually have a choice here. While it may technically be true that the proposal is Basel compliant, Basel compliant does not mandate a 25% increase in capital requirements. Implementing the Basel III endgame consistently with how the Europeans have by retaining credit risk modeling and also address”