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TCH Files Comment Letter Highlighting Concerns with Incorporation of G-SIB Surcharge into CCAR

The Clearing House (TCH) has filed an unsolicited comment letter identifying significant analytical, policy and practical problems that strongly caution against any incorporation of the capital surcharge for U.S. GSIBs into CCAR. TCH argues that these issues are compounded by what appear to be significant limitations and weaknesses in the methodological framework used to calibrate the FRB’s GSIB surcharge rule (which has never been subject to public comment). Specifically, TCH argues that: (i) incorporating the GSIB surcharge into CCAR would undermine its credibility and integrity as a stress test; (ii) CCAR is already designed to capture risks that are unique to GSIBs; (iii) weaknesses and limitations of the FRB’s methodology for calibrating the GSIB surcharge make any incorporation of the surcharge into CCAR particularly inappropriate; and (iv) failure of the GSIB surcharge rule to account for continuing regulatory developments that have substantially decreased the systemic risk of GSIBs makes its calibration increasingly inaccurate and overstated. TCH also identifies market consequences with increasing the required post-stress capital amounts under CCAR by some or all of the GSIB surcharge.