Wall Street’s largest banks are escalating a dispute over proposed changes to the Federal Reserve’s Global Systemically Important Bank (GSIB) capital surcharge, with JPMorgan and Bank of America warning of significant financial penalties while Goldman Sachs and Morgan Stanley anticipate gains.
The Fed’s proposal, unveiled earlier this year, aims to make the GSIB surcharge more risk-sensitive by adjusting how short-term wholesale funding is weighted in the calculation. Under the current framework, each of the five systemic risk factors contributing to the surcharge carries a uniform 20% weight. The revised approach would reduce the weight on short-term wholesale funding, which historically accounted for roughly 30% of the calculation.
JPMorgan estimates it would lose out on $13 billion in capital relief if the proposal is finalized, while Bank of America projects a $9 billion shortfall. In contrast, Goldman Sachs and Morgan Stanley each stand to gain between $1 billion and $2 billion in additional relief, according to JPMorgan’s analysis. The divergent impacts reflect differences in each bank’s reliance on short-term wholesale funding: Morgan Stanley’s liabilities include 37% from such sources, followed by Goldman Sachs at 30%, Bank of America at 24%, and JPMorgan at 21%, per 2026 federal data.
The Fed’s review, initiated in 2022, seeks to refine capital rules first introduced in the aftermath of the 2007-2009 financial crisis. The proposed changes have drawn criticism from JPMorgan’s business banking chief, Stevie Baron, who argued that the current draft "would incentivize trading activity over lending to small businesses and customers." Bank of America, in a public comment, stated it supports reforms "that drive Main Street lending, job creation, and affordability."
Christopher Appel, director of banking policy at the Washington advocacy group Better Markets and a former Fed employee, warned that the central bank faces a critical decision. "They're going to have to choose," Appel said. "It's absolutely critical that the Fed get this right." Fed Vice Chair for Supervision Michelle Bowman has not publicly commented on the proposal.
The dispute coincides with a shifting political landscape. Democrats are expected to regain control of the U.S. House of Representatives in 2027, which analysts anticipate will intensify regulatory scrutiny under President Donald Trump’s appointees. JPMorgan and Morgan Stanley executives have met with Fed officials at least four times each since March to press their cases, according to records reviewed by the publication.
The Fed has not indicated a timeline for finalizing the rule, but the public comment period remains open as the banking industry lobbies aggressively for adjustments.
