Enhanced Prudential Regulation of Large Banks

December 15, 2023 R47876

Enhanced Prudential Regulation of Large Banks December 15, 2023
The 2007-2009 financial crisis highlighted the problem of “too big to fail” financial
institutions—the concept that the failure of large financial firms could trigger financial
Marc Labonte
instability, which in several cases prompted extraordinary federal assistance to prevent their
Specialist in
failure. One pillar of the 2010 Dodd-Frank Act’s (P.L. 111-203) response to addressing financial
Macroeconomic Policy
stability and ending too big to fail was the creation of an enhanced prudential regulatory regime

for large banks. (The act also envisions the regulation of systemically important nonbank
financial firms under this regime, but that part of the regime is effectively defunct.)

Under this regime, the Federal Reserve (Fed) is required to apply a number of safety and soundness requirements to large
banks that are more stringent than those applied to smaller banks. These requirements are intended to mitigate systemic risk
posed by large banks:
• Stress tests and capital planning ensure that banks hold enough capital to survive a crisis.
• Living wills provide plans to safely wind down failing banks.
• Liquidity requirements ensure that banks are sufficiently liquid if they lose access to funding markets.
• Counterparty limits restrict a bank’s exposure to counterparty default.
• Risk management requires banks to have chief risk officers and publicly traded banks to have risk
committees on their boards.
• Financial stability requirements provide for regulatory interventions that can be taken only if a bank poses
a threat to financial stability.
• Capital requirements under Basel III, an international agreement, require large banks to hold more capital
than other banks do to potentially absorb unforeseen losses.
The Dodd-Frank Act automatically subjected all bank holding companies (BHCs) and foreign banks with more than $50
billion in assets to enhanced prudential regulation (EPR). In 2018, the Economic Growth, Regulatory Relief, and Consumer
Protection Act (P.L. 115-174) created a more “tiered” and “tailored” EPR regime for banks. It exempted banks with assets
between $50 billion and $100 billion from enhanced regulation. The Fed was given discretion to apply most individual EPR
provisions to banks with between $100 billion and $250 billion in assets on a case-by-case basis if it would promote financial
stability or the institutions’ safety and soundness and subsequently exempted them from several EPR requirements. The eight
domestic banks that have been designated as Global-Systemically Important Banks (G-SIBs) and banks with more than $250
billion in assets or $75 billion in cross-jurisdictional activity remain subject to all Dodd-Frank EPR requirements. In addition,
the Fed has applied some EPR requirements on a progressively tiered basis to foreign banks with over $50 billion in U.S.
assets and $250 billion in global assets.
In the view of the banking regulators at the time and the supporters of P.L. 115-174, these changes better tailored EPR to
match the risks posed by large banks. Opponents have been concerned that the additional systemic and prudential risks posed
by these changes outweigh the benefits to society, believing that the benefits of reduced regulatory burden would mainly
accrue to the affected banks. This debate was revived by the failure of three large banks in 2023, which resulted in emergency
government intervention to prevent financial instability and considerable losses for the Federal Deposit Insurance
Corporation.
Since then, there has been a new emphasis on applying new proposals to all banks with more than $100 billion in assets
(including those that are not BHCs). This is in contrast to changes after the enactment of P.L. 115-174, when regulators were
focused on rolling back requirements for banks in the $50 billion to $250 billion asset range. The one failed bank that was
subject to EPR, Silicon Valley Bank, had not yet been phased into most EPR requirements when it failed because of its recent
rapid growth. The other two failed banks were not subject to EPR because they were not BHCs.
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Table 2. Estimated Impact of Proposed AOCI Inclusion on Capital ............................................. 33

Contacts
Author Information ........................................................................................................................ 39

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Introduction
A financial firm is said to be “too big to fail” (TBTF) if its disorderly failure would cause
contagion or widespread disruptions in financial markets and result in economic distress that the
government would feel compelled to prevent, perhaps by “bailing out” the firm. Such
systemically important firms are a source of systemic risk—the potential for widespread
disruption to the financial system, as occurred in 2008 when the securities firm Lehman Brothers
failed.1
Although TBTF has been a perennial policy issue, it was highlighted by the collapse or near-
collapse of several large financial firms in 2008. Many of the large firms were nonbank financial
firms, but a few were depository institutions.2 To avert the imminent failures of Wachovia and
Washington Mutual, the Federal Deposit Insurance Corporation (FDIC) arranged for them to be
acquired by other banks without government financial assistance. Citigroup and Bank of America
received extraordinary assistance through the Troubled Asset Relief Program (TARP) and
government guarantees on selected assets they owned.3 In many of these cases, policymakers
explained their reasoning for government intervention on the grounds that the firms were
systemically important, although the government had no explicit policy to rescue TBTF firms
beforehand.
Policymakers have debated the best approach to tackling TBTF since then. A new enhanced
prudential regulation (EPR) regime for large banks administered by the Federal Reserve (Fed)
was created in the post-crisis Dodd-Frank Wall Street Reform and Consumer Protection Act
(hereinafter, the Dodd-Frank Act; P.L. 111-203). In 2018, the Economic Growth, Regulatory
Relief, and Consumer Protection Act (sometimes referred to by its bill number S. 2155, referred
to hereinafter as P.L. 115-174), a regulatory relief bill, made changes to EPR, including raising
the asset threshold for EPR. Since 2010, regulators have continually tweaked large bank
regulations and Congress has debated legislative changes. TBTF banks were brought back into
the spotlight in the spring of 2023 when three banks with over $100 billion in assets—Silicon
Valley Bank (SVB), Signature Bank, and First Republic—failed, leading regulators to use their
emergency authority to prevent financial instability and a projected tens of billions in losses to the
FDIC Deposit Insurance Fund.
This report begins with a description of what institutions are subject to EPR and what
requirements make up EPR. It then discusses several recent proposed rules applying to large
banks.

1 For an introduction, see CRS In Focus IF10700, Introduction to Financial Services: Systemic Risk, by Marc Labonte.
2 Broadly speaking, only three types of financial charters allow financial institutions to accept insured deposits—banks,
savings associations (often called “thrifts”), and credit unions. Banks operating in the United States can be U.S.-based
or be headquartered in a foreign country. Depository institutions are regulated much differently than are other types of
financial institutions.
3 The government also created broadly based programs to provide liquidity and capital to solvent banks of all sizes
during the financial crisis to restore confidence in the banking system. For more information, see CRS Report R43413,
Costs of Government Interventions in Response to the Financial Crisis: A Retrospective, by Baird Webel and Marc
Labonte.
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Legislative History
The Dodd-Frank Act
Before the financial crisis, banks were generally subject to the same prudential regulatory regime
irrespective of their size, with some ad hoc tailoring of specific requirements. In response to the
crisis, the Dodd-Frank Act, a comprehensive financial regulatory reform, was enacted in 2010.4
Among its stated purposes are “to promote the financial stability of the United States…, [and] to
end ‘too big to fail,’ to protect the American taxpayer by ending bailouts.”5 The Dodd-Frank Act
took a multifaceted approach to addressing TBTF issues. This report focuses on one pillar of that
approach—the Fed’s EPR regime for large banks.6
Title I, Subtitle C, of the Dodd-Frank Act (as originally enacted) automatically subjected all bank
holding companies (BHCs)7 and foreign banks operating in the United States with more than $50
billion in assets8 to the EPR regime administered by the Fed.9 (Nonbank financial firms
designated as by the Financial Stability Oversight Council [FSOC] are also subject to EPR, but
there are currently no such designated firms—see the text box.10) EPR standards must be more
stringent than those applied to banks with less than $50 billion in assets. Dodd-Frank allowed the
Fed to tailor EPR requirements based on the riskiness, complexity, or size of the bank.11 The EPR
regime also applies to foreign banking organizations operating in the United States that meet the
EPR asset threshold based on global assets.12 The Dodd-Frank Act required the Fed to establish
the following EPR standards:
• Capital requirements, which must include those that take into account off-
balance-sheet exposures and an emergency leverage limit;
• Liquidity requirements;
• Risk management requirements;
• Resolution plans;

4 For an overview, see CRS Report R41350, The Dodd-Frank Wall Street Reform and Consumer Protection Act:
Background and Summary, coordinated by Baird Webel. For more information on systemic risk provisions, see CRS
Report R41384, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Systemic Risk and the Federal
Reserve, by Marc Labonte.
5 124 Stat. 1376.
6 For an overview of the TBTF issue and other policy approaches to mitigating it, see CRS Report R42150,
Systemically Important or “Too Big to Fail” Financial Institutions, by Marc Labonte.
7 A BHC structure is used any time a company owns multiple banks, but the BHC structure also allows for a large,
complex financial firm with depository banks to operate multiple subsidiaries in different financial sectors—these types
of BHCs are sometimes called financial holding companies.
8 The Financial Stability Oversight Council may recommend that this threshold be raised. It was not raised prior to the
enactment of P.L. 115-174.
9 In setting standards for foreign banks, Title I requires the Fed to take into account the extent that they face comparable
regulation in their home countries and give due regard to equal competition.
10 For more information, see CRS Report R45052, Financial Stability Oversight Council (FSOC): Structure and
Activities, by Marc Labonte.
11 Before P.L. 115-174, the Fed’s rules had also tailored some of the EPR requirements for banks with more than $50
billion in assets so that more stringent regulatory or compliance requirements were applied to banks with more than
$250 billion in assets or Global-Systemically Important Banks, depending on the requirement.
12 Section 102 of the Dodd-Frank Act specifies that foreign banks that are treated as BHCs for purposes of the Bank
Holding Company Act of 1956, pursuant to Section 8(a) of the International Banking Act of 1978, are considered
BHCs for application of EPR if they have more than $50 billion in global assets.
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• Credit exposure reports;13
• Concentration limits on counterparty credit exposure; and
• Stress tests.
The Fed was also given the discretion to impose any other requirements it deemed appropriate,
including contingent capital requirements, enhanced public disclosures, and short-term debt
limits. The section below entitled “What Requirements Must Large Banks Comply with Under
Enhanced Regulation?” describes how the Fed has implemented these requirements (including
subsequent amendments to the original law).
If a bank does not have a BHC structure, it is not subject to enhanced regulation.14 Most large
banks have a holding company structure, but there are three exceptions worth noting. One is
Zions Bank, which converted its corporate structure from a BHC to a standalone bank in 2018,
reportedly in order to no longer be subject to EPR.15 Under Title I of the Dodd-Frank Act’s “Hotel
California” provision, BHCs that participated in TARP and are subject to EPR cannot escape EPR
by debanking (i.e., divesting of their depository businesses) unless permitted to by FSOC.16
FSOC found that “there is not a significant risk that Zions could pose a threat to U.S. financial
stability” and permitted it to withdraw from EPR.17 The other exceptions are Signature Bank and
First Republic, which failed in 2023. Signature’s failure at the same time as SVB set off a bank
run that resulted in the FDIC and Fed using their emergency authority to prevent financial
instability.
EPR for Nonbanks
Five large investment “banks” that operated in securities markets and did not have depository subsidiaries (and
therefore were not BHCs) were among the largest, most interconnected U.S. financial firms and were at the
center of events during the financial crisis. Al five are today part of BHCs (and subject to EPR) or no longer exist.
Goldman Sachs and Morgan Stanley were granted BHC charters in 2008, whereas the others failed (Lehman
Brothers) or were acquired by BHCs (Merril Lynch and Bear Stearns). Economists and policymakers disagree
about whether any remaining large nonbank financial firms pose systemic risk—the rationale for EPR. Numerous
other large financial firms operating in the United States—such as credit unions, insurance companies,
government-sponsored enterprises, asset managers, and nonbank lenders—are not BHCs and therefore are not
automatically subject to EPR. However, the Dodd-Frank Act gave FSOC the authority to designate any nonbank
financial firm for EPR, known popularly as systemically important financial institution (SIFI) designation, if its failure
or activities could pose a risk to financial stability. Designated SIFIs are then subject to the Fed’s EPR regime,
which can be tailored to consider their business models. Since the bil became law, FSOC designated three
insurers (AIG, MetLife, and Prudential Financial) and one nonbank lender (GE Capital). MetLife’s designation was

13 P.L. 115-174 changed this mandatory requirement to a discretionary one. The Fed has not implemented credit
exposure reports to date.
14 A key difference between banks and BHCs is what types of activities they can engage in, which affects their
complexity. Banks are somewhat more limited in the types of activities they can engage in than the nonbank
subsidiaries of BHCs that have been approved to be financial holding companies. Banks can engage in activities that
are incidental or closely related to the business of banking. Financial holding companies (through their nonbank
subsidiaries) can engage in activities that are financial in nature, incidental to a financial activity, or complementary to
a financial activity. In practice, there are multiple activities that are permitted for both banks and BHCs under these
definitions. Both banks and BHCs are permitted to have multiple subsidiaries.
15 Christina Rexrode, “Zions to Challenge Its ‘Big Bank’ Label,” Wall Street Journal, November 20, 2017,
https://www.wsj.com/articles/zions-plans-to-challenge-its-big-bank-label-1511128273 (subscription required).
16 The popular name of the provision comes from a 1976 song by The Eagles, an American rock band, with the lyric
“You can check out any time you like, but you can never leave.”
17 FSOC, “Financial Stability Oversight Council Announces Final Decision to Grant Petition from ZB, N.A.,” press
release, September 12, 2018, https://home.treasury.gov/news/press-releases/sm478.
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subsequently invalidated by a court decision,18 which the Trump Administration declined to appeal, and FSOC
later rescinded the other three designations.19 In some cases, these former SIFIs had substantially altered or
shrunk their operations between designation and de-designation. The Fed had not finalized any rules imposing EPR
requirements on the SIFIs before they were de-designated.
P.L. 115-174
In 2018, P.L. 115-174 was enacted to provide regulatory relief to financial firms, including large
banks. Section 401 of P.L. 115-174 eliminated most EPR requirements for banks with assets
between $50 billion and $100 billion. Global-Systemically Important Banks (G-SIBs) and banks
that have more than $250 billion in assets automatically remained subject to all EPR
requirements, as modified by the act. P.L. 115-174 made the tailoring of EPR mandatory to reflect
differences among BHCs and gave the Fed discretion to apply most individual EPR provisions to
banks with between $100 billion and $250 billion in assets on a case-by-case basis only if it
would promote financial stability or the institution’s safety and soundness, taking into
consideration its riskiness and characteristics. P.L. 115-174 raised the EPR threshold for global
assets but did not introduce a threshold for U.S. assets of foreign banks. It clarified that the act
did not affect the Fed’s rule on intermediate holding companies (IHCs) for foreign banks with
more than $100 billion in global assets or limit the Fed’s authority to subject those banks to EPR.
P.L. 115-174 also made changes to specific enhanced prudential requirements. Section 401:
• gave regulators the discretion to reduce the number of scenarios used in stress
tests,
• gave regulators the discretion to reduce the frequency of Fed-run stress tests for
banks with $100 billion to $250 billion and company-run stress tests,
• increased the asset thresholds for mandatory company-run stress tests from $10
billion to $250 billion and for a mandatory risk committee at publicly traded
banks from $10 billion to $50 billion, and
• made the implementation of credit exposure report requirements discretionary for
the Fed instead of mandatory. (To date, the Fed has not finalized a rule
implementing credit exposure reports.)20

18 MetLife vs. Financial Stability Oversight Council, 15-0045 (RMC) (U.S. District Court for the District of Columbia
2016), https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2015cv0045-105.
19 Designations and de-designations are available at https://www.treasury.gov/initiatives/fsoc/designations/Pages/
default.aspx.
20 For details on these provisions, see the section below entitled “What Requirements Must Large Banks Comply with
Under Enhanced Regulation?” In addition, Section 402 of the act reduced capital required under the supplementary
leverage ratio (SLR) for custody banks subject to the SLR.
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Size Thresholds Outside of EPR
Prior to the enactment of P.L. 115-174, U.S. regulators described the prudential regulatory regime applying to all
banks as tiered regulation, meaning that increasingly stringent regulatory requirements are applied as metrics (such
as a bank’s size) increase. These different tiers have been applied on an ad hoc basis: In some cases, statute
requires a given regulation to be applied at a certain size; in some cases, regulators have discretion to apply a
regulation at a certain size; and in other cases, regulators must apply a regulation to all banks. In addition to $100
bil ion and $250 bil ion, notable thresholds found in bank regulation are $1 bil ion, $3 bil ion, $5 bil ion, and $10
bil ion.
The Dodd-Frank Act includes other bank regulations with size thresholds. For example, by statute, only banks
with more than $10 bil ion in assets are subject to the Durbin Amendment,21 which caps debit interchange fees,
and supervision by the Consumer Financial Protection Bureau for consumer compliance. Pursuant to the Dodd-
Frank Act, executive compensation rules for financial firms apply only to firms with more than $1 bil ion in assets,
with more stringent requirements for firms with more than $50 bil ion and $250 bil ion proposed by regulation.
P.L. 115-174 created or increased several other asset thresholds used in bank regulation outside of EPR. For
example, it exempted banks from the Volcker Rule if they had less than $10 bil ion in assets and trading assets and
liabilities less than 5% of total assets.22 It created a new Community Bank Leverage Ratio for banks with less than
$10 bil ion in assets that wish to opt out of compliance with Basel III capital rules. It also created or increased
small bank exemptions or tailoring for holding mortgages, call reporting requirements, thrift regulation, holding
company capital requirements, and frequency of bank exams.23
For more information, see CRS Report R46779, Over the Line: Asset Thresholds in Bank Regulation, by Marc Labonte
and David W. Perkins.
The 2019 EPR Rules Implementing P.L. 115-174
In 2019, the Fed implemented changes included in P.L. 115-174 through rulemaking that placed
large banks in one of four categories based on their size and complexity and imposed
progressively more stringent requirements upon them.24 In addition, Basel III (a nonbinding
international agreement that U.S. banking regulators implemented through rulemaking after the
financial crisis) included several capital requirements that apply only to large banks. Both the
Dodd-Frank requirements and the Basel III requirements are based on these categories, and some
requirements are derived from both. The rule also extended EPR for the first time to large savings
and loan (thrift) holding companies that are not predominantly engaged in insurance or
nonfinancial activities.25

21 For more information, see CRS Report R41913, Regulation of Debit Interchange Fees, by Darryl E. Getter.
22 For more information, see CRS In Focus IF10923, Financial Reform: Overview of the Volcker Rule, by Rena S.
Miller.
23 For more information, see CRS Report R45073, Economic Growth, Regulatory Relief, and Consumer Protection Act
(P.L. 115-174) and Selected Policy Issues, coordinated by David W. Perkins.
24 Federal Reserve, “Federal Reserve Board Finalizes Rules That Tailor Its Regulations for Domestic and Foreign
Banks to More Closely Match Their Risk Profiles,” press release, October 10, 2019, https://www.federalreserve.gov/
newsevents/pressreleases/bcreg20191010a.htm; Federal Reserve, “Federal Reserve Board Issues Final Rule Modifying
the Annual Assessment Fees for Its Supervision and Regulation of Large Financial Companies,” press release,
November 19, 2020, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201119a.htm; Federal Reserve,
FDIC, Office of the Comptroller of the Currency, “Agencies Issue Final Rule to Strengthen Resilience of Large
Banks,” press release, October 20, 2020, https://www.federalreserve.gov/newsevents/pressreleases/
bcreg20201020b.htm; Federal Reserve, FDIC, “Agencies Finalize Changes to Resolution Plan Requirements; Keeps
Requirements for Largest Firms and Reduces Requirements for Smaller Firms,” press release, October 28, 2019,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20191028b.htm. For a summary of the rule, see Federal
Reserve, “Requirements for Domestic and Foreign Banking Organizations,” https://www.federalreserve.gov/
aboutthefed/boardmeetings/files/tailoring-rule-visual-20191010.pdf.
25 Similar to BHCs, thrift holding companies (THCs), also called savings and loan holding companies, have
(continued...)
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The Fed provides an up-to-date list of banks by category semi-annually in its Supervision and
Regulation Report.26 Category I banks are subject to the most stringent requirements, and
Category IV banks are subject to the least. The categories are defined as follows:
• Since 2015, the Fed has annually designated the most systemically important
banks as U.S. G-SIBs based on their cross-jurisdictional activity, size,
interconnectedness, substitutability, and complexity.27 As a result, the eight U.S.
banks designated as G-SIBs since inception are not the eight largest U.S. banks—
they are the six largest and two others (State Street and Bank of New York
Mellon) that are not among the 10 largest but rank highly on several measures
related to the other four factors listed above. The eight U.S. G-SIBs are classified
as Category I banks and are subject to the most stringent regulations and
supervisory scrutiny of any group of banks.28
• Banks with over $700 billion in assets that are not Category I banks are classified
as Category II banks. Banks with between $100 billion and $700 billion in
assets that have over $75 billion in cross-jurisdictional (overseas) activity are
also classified as Category II banks. Since 2019, there has been one U.S.
Category II bank (Northern Trust) that qualifies because of its cross-jurisdictional
activities. It is well below the $700 billion assets threshold.
• Banks with over $250 billion in assets that are not Category I or II banks are
classified as Category III banks. Banks with between $100 billion and $250
billion in assets that pose more systemic risk—because they have over $75
billion in nonbank assets, short-term wholesale funding, or off-balance-sheet
exposure—are also classified as Category III banks.
• Banks with between $100 billion and $250 billion in assets that do not meet the
criteria of Categories I, II, or III are classified as Category IV banks.
As permitted under P.L. 115-174, EPR applies to foreign banks with over $100 billion in
worldwide assets, but the implementing rule defers to home country regulation for most
requirements when the foreign bank has less than $100 billion in U.S. assets.29 Foreign banks
with over $50 billion in U.S. nonbranch assets are required to form IHCs for their U.S.
activities.30 Most requirements are applied to the U.S. IHC, but a few apply to all U.S. operations,
including U.S. branches and agencies. Most requirements are not applied to their foreign

subsidiaries that accept deposits and make loans and can also have nonbank subsidiaries. Although Dodd-Frank also
made the Fed the primary regulator of THCs, the EPR statute does not mention THCs.
26 Available at https://www.federalreserve.gov/publications/supervision-and-regulation-report.htm.
27 12 C.F.R. 217 Subpart H. The Fed bases the designation on a bank’s Method 1 score, a numerical formula using
various metrics to represent the five factors listed above. The Fed’s designation process parallels the international one.
Since 2011, the Financial Stability Board, an international forum that coordinates the work of national financial
authorities and international standard-setting bodies, has annually designated G-SIBs around the world. See Financial
Stability Board, “Policy Measures to Address Systemically Important Financial Institutions,” November 4, 2011,
http://www.financialstabilityboard.org/publications/r_111104bb.pdf. The board’s methodology for designating G-SIBs
was formulated by the Basel Committee on Banking Supervision. See Basel Committee on Banking Supervision,
Global Systemically Important Banks: Assessment Methodology and the Additional Loss Absorbency Requirement,
November 2011, http://www.bis.org/publ/bcbs207.pdf.
28 Although some foreign G-SIBs have U.S. operations, none is considered a domestic G-SIB for purposes of EPR.
29 Living wills are the main exception. Foreign banks with over $250 billion in global assets and a small U.S. presence
must file streamlined versions of the living will every three years. See Federal Reserve, “Presentation Materials for
Resolution Plan Requirements for Foreign and Domestic Banking Organizations,” Figure A, April 2019,
https://www.federalreserve.gov/aboutthefed/boardmeetings/files/resolution-plans-visuals-20190408.pdf.
30 IHCs with between $50 billion and $100 billion in assets must comply with risk management requirements.
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activities. The IHCs or U.S. operations of foreign banks are placed in the same Categories II-IV,
based on their U.S. assets, with requirements for each category similar to those applied to U.S.
banks. Several of the parent foreign banks are G-SIBs internationally, but none of their IHCs is a
Category I bank in the United States. Generally, the rule aims for consistency in the regulation of
U.S. activities between foreign and domestic banks.31
Figure 1 shows the number of U.S. BHCs subject to EPR by category.
Figure 1. Banks Subject to EPR
End of Year 2022

Source: Federal Reserve, Supervision and Regulation Report, May 2023, Table A.1.
Note: Domestic = U.S. BHC; IHC = international holding company; C-J = cross-jurisdictional activity; NBA =
nonbank assets; WSTF = weighted wholesale short-term funding; OBS = off-balance-sheet exposure. See text for
details.
The Fed had already tailored some EPR requirements before the enactment of P.L. 115-174, but
under this rule, the Fed chose to exempt Category III and IV banks from some EPR requirements
and subject them to less stringent versions of other requirements. Hereinafter, the report will refer
to BHCs, thrift holding companies (THCs), and foreign banking operations meeting the criteria
described above as banks subject to EPR, unless otherwise noted.
What Requirements Must Large Banks Comply with
Under Enhanced Regulation?
All BHCs are subject to long-standing prudential (safety and soundness) regulation conducted by
the Fed. The novelty in the Dodd-Frank Act was to create a group of specific prudential

31 Federal Reserve, “Prudential Standards for Large Foreign Bank Operations,” April 8, 2019,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190408a.htm. An exception is living will
requirements, where foreign banks face a less stringent requirement based on their global assets.
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requirements that apply only to large banks.32 The Fed has promulgated regulations implementing
EPR (based on recommendations, if any, made by FSOC) and supervises firms subject to the
regime. Many requirements are applied to both the BHC on a consolidated basis and its banking
subsidiaries. The latter are administered in some cases by the primary federal regulator, which
could be the Fed, the Office of the Comptroller of the Currency (OCC), or the FDIC, depending
on the bank’s charter type. The cost to the Fed of administering the regime is financed through
assessments on firms subject to the regime.
The Dodd-Frank regime is referred to as enhanced or heightened because it applies higher or
more stringent standards to large banks than it applies to smaller banks. It is a prudential regime
because the regulations are intended to contribute toward the safety and soundness of the banks
subject to the regime. Some EPR provisions are intended to reduce the likelihood that a bank will
experience financial difficulties, while others are intended to help regulators cope with a failing
bank. Several of these provisions directly address problems or regulatory shortcomings that arose
during the financial crisis.
Some of the requirements related to capital and liquidity overlap with parts of the Basel III
international agreement. The EPR requirements that the Fed has implemented pursuant to Title I
of the Dodd-Frank Act as amended (which will be referred to hereinafter as Title I) and Basel III
are summarized in Table 1 and described in more detail in the following sections.33 Subsequent to
initial implementation, numerous regulatory changes over the years have tailored the individual
provisions discussed in this section. This report does not provide a comprehensive catalog of all
those subsequent changes but presents the regulations as they are implemented as of the report
date and notes selected, significant changes.
Table 1. Current EPR Requirements for Banks
Originally Applied
Original Effective
Requirement
Currently Applies to
to
Agency Issuing
Date
Company-run stress tests
Category I-II and their
$50B+ BHCs (semi-
Fed
2012
IDIs (annual)
annual)

Category III and their

Fed/FDIC/OCC
IDIs (biennial)
$10B+ BHCs and IDIs
other $250B+ IDIs
(annual)
(biennial)
Supervisory stress tests
Category I-III (annual)
$50B+ BHCs (annual)
Fed
2012 (supersedes
Category IV (biennial)
earlier stress tests)
Risk management
$50B+ BHCs
$10B+ BHCs (risk
Fed
2014
committee)
$50B+ BHCs (chief risk
officer)
Capital plan
Category I-IV (annual)
$50B+ BHCs (annual)
Fed
2011

32 The $50 billion threshold is also used in a few other requirements unrelated to EPR. For example, in the Dodd-Frank
Act, it is used for two provisions related to swaps regulation and assessments to fund various activities.
33 This section does not cover the Title I discretionary requirements that the Fed has not implemented to date. The Fed
may institute contingent capital requirements, short-term debt limits, and enhanced public disclosures. Title I also
grants the Fed the authority to implement “such other prudential standards as [the Fed] determines appropriate.”
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Originally Applied
Original Effective
Requirement
Currently Applies to
to
Agency Issuing
Date
Living wills
Category I (biennial)
$50B+ BHCs (annual)
Fed/FDIC
2011
Category II-III (triennial)

FBOs $250B+ global

assets not categorized

(reduced, triennial)
$50B+ IDIs (annual)
2012
$50B+ IDIs (triennial)
(moratorium since 2018
for <$100B)
Liquidity stress test (firm-
Category I-III (monthly
$50B+ BHCs (monthly
Fed
2014
run), reporting, and risk
stress test)
stress test)
management
Category I, Category II,
Category III w/ $75B+
wstf (daily reporting)
Category III <$75B wstf,
Category IV (monthly
reporting)
Category IV (quarterly
stress test)
Liquidity Coverage Ratio
Category I, Category II,
Banks w/ $250B+
Fed/OCC/FDIC
2015
Category III w/ $75B+
assets or $10B+ foreign
wstf (most stringent)
exposure (more
and their $10B+ IDIs
stringent) and their
Category III w/ <$75B
$10B+ IDIs
wstf (more stringent)
$50B-$250B BHCs
and their $10B+ IDIs
(less stringent) and
Category IV w/ $50B+
their $10B+ IDIs
wstf (least stringent) and
their $10B+ IDIs
would apply to $250B
bank w/o BHC, but
none currently
Net stable funding ratio
Category I, Category II,
n/a
Fed/OCC/FDIC
2021
Category III w/ $75B+
wstf (most stringent)
and their $10B+ IDIs
Category III w/ <$75B
wstf (more stringent)
and their $10B+ IDIs
Category IV w/ $50B+
wstf (least stringent) and
their $10B+ IDIs
would apply to $250B
bank w/o BHC, but
none currently
Single counterparty credit
Category I (more
U.S. G-SIBs (more
Fed
2018
limit
stringent)
stringent)
Category II and III (less
$250B+ BHCs and
stringent)
$50B+ IHCs (less
stringent)
Emergency provisions
$250B+ BHCs
$50B+ BHCs
n/a
n/a
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Originally Applied
Original Effective
Requirement
Currently Applies to
to
Agency Issuing
Date
Subject to assessments for:
Category I-III (OFR)
$50B+ BHCs (OFR,
Treasury (OFR); Fed (EPR);
2012 (OFR); 2013
Category I-III (EPR
EPR, OLA)
FDIC (OLA)
(EPR); n/a (OLA)
higher), Category IV
(EPR lower)
$50B+ BHCs (OLA)
Simplified capital treatment
Banks that are not
n/a
Fed/OCC/FDIC
2019
of certain assets
advanced approaches
banks
Stress capital buffer
Category I-IV
n/a
Fed
2020
Supplementary leverage ratio Category I and their
$700B+ assets or
Fed/OCC/FDIC
2014 (SLR), 2018
IDIs (eSLR); IDIs w/
$10Tr+ custody assets
(eSLR)
$700B+ assets or
(eSLR)
$10Tr+ custody assets
Advanced approaches
Category II and III and
banks (SLR)
their IDIs (SLR)
Advanced approaches
Category I-II and their
Banks/BHCs w/
Fed/OCC/FDIC
2008
IDIs (mandatory)
$250B+ assets or
$10B+ foreign
exposure and their IDIs
AOCI included in capital
Category I-II and their
Advanced approaches
Fed/OCC/FDIC
2014
IDIs (mandatory)
banks (mandatory)
Countercyclical capital buffer Category I-III and their
Advanced approaches
Fed/OCC/FDIC
2014
IDIs
banks
Total loss absorbency
Category I, IHCs of
U.S. G-SIBs, IHCs of
Fed
2017
capacity
foreign G-SIBs
foreign G-SIBs
G-SIB capital surcharge
Category I
U.S. G-SIBs
Fed
2015
Source: CRS analysis of Federal Register and Code of Federal Regulations.
Notes: See text for details of requirements and categories. Requirements applicable to BHCs are also applicable
to the U.S. operations or IHCs of foreign banking organizations. Application of provisions to nonbank SIFIs is
beyond the scope of this table. The table does not include the application of provisions under proposed rules
that have not been finalized. eSLR = enhanced Supplementary Leverage Ratio, G-SIB = Global-Systemically
Important Bank, AOCI = accumulated and other comprehensive income, OFR = Office of Financial Research,
EPR = enhanced prudential regulation, OLA = Orderly Liquidation Authority, IHC = intermediate holding
company, WSTF = wholesale short-term funding. Categories are defined in Figure 1.
Stress Tests, Capital Planning, and the Stress Capital Buffer
Stress tests and capital planning are two enhanced requirements that have been implemented
together. Banks are subject to company-run stress tests, where the bank projects losses and capital
levels under a severely adverse scenario provided by the Fed, and Fed-run stress tests, where the
Fed makes those projections based on data it receives from the bank. Fed-run stress tests and
capital planning requirements provide the Fed with an assessment of whether large banks have
enough capital to withstand another crisis as simulated using a specific adverse scenario
developed by the Fed. Following the enactment of P.L. 115-174, the Fed implemented tiered
requirements:
• Category I-IV banks must submit annual capital plans;
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• Category I and II banks are subject to annual company-run stress tests, Category
III banks must perform company-run stress tests every other year, and Category
IV banks are exempt from company-run stress tests;
• Category I-III banks are subject to Fed-run stress tests every year, and Category
IV banks are subject every other year.34
Stress tests attempt to project the losses that banks would suffer under a hypothetical deterioration
in economic and financial conditions to determine whether banks would remain solvent in a
future crisis. Unlike general capital requirements that are based on current asset values, stress
tests incorporate an adverse scenario that focuses on projected asset values based on specific
areas of concern each year. For example, the 2017 adverse scenario was “characterized by a
severe global recession that is accompanied by a period of heightened stress in corporate loan
markets and commercial real estate markets.”35 Stress test requirements were initially
implemented through final rules in 2012, effective beginning in 2013.36 These superseded an
earlier type of stress test the Fed introduced during the financial crisis before the enactment of the
Dodd-Frank Act.
The final rule for capital planning was implemented in 2011.37 Category I-IV banks must submit
capital plans to the Fed annually. The capital plan must include a projection of the expected uses
and sources of capital, including planned debt or equity issuance and dividend payments. The
plan must demonstrate that the bank will remain in compliance with capital requirements under
the stress tests.
Originally, the Fed could reject a bank’s capital plan, in which case the bank could not make any
capital distributions, such as stock buybacks or dividend payments, until a revised capital plan
was resubmitted and approved by the Fed. Each year, the Fed had required some banks to revise
their capital plans or objected to them on qualitative or quantitative grounds or due to other
weaknesses in their processes.38
Over the years, regulators and Congress have taken steps to reduce the regulatory burden of stress
tests. To the extent that stress tests effectively reduce the probability of a large bank failure, these
steps may have also increased the risk of failure during a crisis. In 2017, the Fed removed
qualitative requirements from the capital planning process for banks with less than $250 billion in
assets that are not complex.39 In addition to reducing the number of firms subject to stress testing,
P.L. 115-174 also reduced the number of stress test scenarios and the frequency of company-run
stress tests from semi-annually to periodically. The Fed also reduced the frequency of Fed-run

34 These changes were implemented in the 2019 tailoring rule and in a 2021 rule. See Federal Reserve, “Federal
Reserve Board Finalizes a Rule That Updates the Board’s Capital Planning Requirements to Be Consistent with Other
Board Rules That Were Recently Modified,” press release, January 19, 2021, https://www.federalreserve.gov/
newsevents/pressreleases/bcreg20210119a.htm.
35 Federal Reserve, Dodd-Frank Act Stress Test 2017, June 2017, p. 5, https://www.federalreserve.gov/publications/
files/2017-dfast-methodology-results-20170622.pdf.
36 Federal Reserve, “Annual Company-Run Stress Test Requirements,” 77 Federal Register 62396, October 12, 2012,
https://www.gpo.gov/fdsys/pkg/FR-2012-10-12/pdf/2012-24988.pdf; and Federal Reserve, “Supervisory and
Company-Run Stress Test Requirements,” 77 Federal Register 62378, October 12, 2012, https://www.gpo.gov/fdsys/
pkg/FR-2012-10-12/pdf/2012-24987.pdf.
37 Federal Reserve, “Capital Plans,” 76 Federal Register 74631, December 1, 2011, https://www.federalreserve.gov/
reportforms/formsreview/RegY13_20111201_ffr.pdf. For more information, see Federal Reserve, Capital Planning at
Large Bank Holding Companies, August 2013, https://www.federalreserve.gov/bankinforeg/bcreg20130819a1.pdf.
38 Yearly results are available at https://www.federalreserve.gov/supervisionreg/ccar-by-year.htm.
39 Federal Reserve, “Amendments to the Capital Plan and Stress Test Rules,” 81 Federal Register 9308,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20170130a.htm.
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stress tests for banks with between $100 billion and $250 billion to every other year in 2019.40
Also in 2019, the Fed made changes to the stress test process to increase its transparency.41
Previously, the Fed could “fail” a bank’s plan on quantitative or qualitative grounds. Between
2017 and 2019, the qualitative pass/fail was phased out on the grounds that banks’ capital plans
had improved over the years. (The Fed can still object if a G-SIB’s capital planning
methodologies and practices are not reasonable.)42 The quantitative pass/fail was eliminated in
2020 by the introduction of the stress capital buffer, with which Category I-IV banks must
comply.
Stress Capital Buffer
Title I required enhanced capital requirements for banks subject to EPR. Outside of Basel III
(described below in the “Basel III Capital Requirements” section), enhanced capital requirements
were primarily implemented through, in its current iteration, the stress capital buffer.
Under previous capital planning requirements, large banks were also required to hold enough
capital to remain above the minimum amount required under the various requirements after their
stress test losses, planned capital distributions (such as nine quarters of dividends and share
buybacks), and projected balance sheet growth (because an increase in assets requires a
proportional increase in capital). This created some overlap and redundancy with the capital
requirements that all banks face. As noted by the Fed, before 2020, banks with more than $100
billion in assets had to simultaneously comply with 18 capital requirements, and G-SIBs had to
simultaneously comply with 24 different capital requirements, each addressing a separate but
related risk.43
To try to minimize what it perceived as redundancy among these various measures, the Fed
finalized a rule in 2020 to combine elements of the stress tests and the Basel III requirements into
a new stress capital buffer.44 Under the final rule, Category I-IV banks have to simultaneously
comply with eight capital requirements, and G-SIBs have to simultaneously comply with 14
capital requirements. The final rule accomplished this by eliminating five requirements tied to the
“adverse” scenario in the stress tests, which the Fed was allowed to do under P.L. 115-174, and by
combining four requirements tied to the “severely adverse” stress tests with four Basel III capital
requirements.

40 Banks subject to stress tests every other year use those results to determine their capital requirements for two years.
Federal Reserve, “Federal Reserve Board Releases Scenarios for 2019 Comprehensive Capital Analysis and Review
(CCAR) and Dodd-Frank Act Stress Test Exercises,” press release, February 5, 2019, https://www.federalreserve.gov/
newsevents/pressreleases/bcreg20190205b.htm.
41 Federal Reserve, “Federal Reserve Board Finalizes Set of Changes That Will Increase the Transparency of Its Stress
Testing Program for Nation’s Largest and Most Complex Banks,” press release, February 5, 2019,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190205a.htm.
42 Federal Reserve, “Amendments to the Capital Plan and Stress Test Rules,” 81 Federal Register 9308; Federal
Reserve, “Stress Tests,” https://www.federalreserve.gov/supervisionreg/stress-tests-capital-planning.htm.
43 The 24 capital requirements can be grouped into a few major categories, and all requirements within each category
are based on similar definitions and calculations. In that sense, having a large number of capital requirements does not
create as great of a compliance burden as the number suggests. Rather, the economic burden associated with a large
number of requirements stems from the fact that banks change their behavior to comply with the binding requirement,
and multiple requirements make it more likely that the binding requirement could periodically shift and banks would
adjust their behavior to take that possibility into account.
44 Federal Reserve, “Federal Reserve Board Approves Rule to Simplify Its Capital Rules for Large Banks, Preserving
the Strong Capital Requirements Already in Place,” press release, March 4, 2020, https://www.federalreserve.gov/
newsevents/pressreleases/bcreg20200304a.htm.
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Previously, large banks were required to hold capital conservation buffers equal to 2.5% of their
risk weighted assets (RWA) to avoid limitations on capital distributions.45 The final rule replaced
these separate requirements with a combined stress capital buffer (SCB) that requires banks to
hold enough capital to cover stress test losses and four quarters of dividends or 2.5% of RWA,
whichever is larger (see Figure 2). The former is less restrictive than what banks previously faced
if their projected capital levels fell below the minimum under stress test requirements.46 Capital
requirements would also be lowered for banks that had previously faced binding leverage ratio
constraints based on stress test results. Because the SCB eliminates the leverage ratio from stress
tests, the Fed argues that the leverage ratio appropriately reverts to being more of a backstop than
a binding constraint.47
As noted above, the Fed could previously reject a bank’s capital plan on quantitative grounds if it
was not consistent with the bank remaining well capitalized under the stress test. Instead of a
pass/fail process, the stress capital buffer requires the bank to continuously maintain its buffer or
be subject to restrictions.
Because the Fed decided that banks would no longer have to hold capital to account for capital
distributions (other than dividends) or balance sheet growth, the SCB reduces capital
requirements relative to previous stress tests for non-G-SIBs. However, whether the SCB would
be a lower capital requirement than the previous stress test requirements—and the risk-weighted
Basel III requirements it is replacing—depends on the size of its losses under the stress tests. If
losses are less than 2.5%, then a bank is required to hold the same amount of capital (2.5%) under
the SCB as it did previously under the capital conservation buffer. If they are more than 2.5%,
then a bank is required to hold less capital under the SCB than previously under the stress tests
because the SCB includes fewer factors that require additional capital.48 For G-SIBs, there is an
additional consideration—the SCB is higher if stress tests were previously the binding constraint,
because the SCB includes the G-SIB surcharge and the stress tests did not.

45 The capital conservation buffer remains unchanged for smaller banks that have not elected to comply with the
Community Bank Leverage Ratio. For more information, see CRS Report R47447, Bank Capital Requirements: A
Primer and Policy Issues, by Andrew P. Scott and Marc Labonte.
46 The Fed has provided three justifications for making these requirements less stringent. First, the Fed argues that
because capital distributions would automatically face restrictions if banks’ capital fell below their SCBs, it would no
longer be necessary for firms to hold enough capital to meet all planned capital distributions. However, restrictions are
phased in gradually and distributions are not entirely forbidden unless a bank has depleted all but 0.625% of its SCB.
Second, the Fed argues for removing stock repurchases from capital planning on the grounds that only dividends are
likely to be continued as planned in a period of financial stress. Finally, the Fed argues that its previous assumption that
balance sheets continue to grow in a stressed environment was an unreasonable one—although the COVID crisis that
began one month after the SCB rule was finalized demonstrated that bank balance sheets can grow significantly during
crises. Federal Reserve, “Proposed Rule Regarding the Stress Buffer Requirements,” staff memorandum, April 5, 2018,
pp. 11-13, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180410a1.pdf.
47 The proposed rule would have also required banks to comply with a stress leverage buffer based on the leverage
ratio. The final rule omitted it, in part, to make the leverage ratio more of a backstop. Federal Reserve, “Draft Final
Rule Regarding the Stress Capital Buffer,” staff memorandum, February 19, 2020, https://www.federalreserve.gov/
newsevents/pressreleases/files/bcreg20200304a1.pdf.
48 If a G-SIB’s stress test losses exceeded 2.5%, it would be required to hold less capital only if the sum of the bank’s
capital distributions and projected balance sheet growth were greater than the sum of the bank’s G-SIB surcharge and
dividends.
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Figure 2. Risk-Weighted Capital Requirements for Large Banks, 2023
Common Equity Tier 1

Source: CRS.
Notes: CCB = capital conservation buffer, SCB = stress capital buffer, GSIB = Global-Systemically Important
Bank.
At the time the rule was finalized, the Fed calculated what would have happened if the SCB had
been in place in recent years. It found that the SCB would have reduced required capital for large
banks that are not G-SIBs (because the stress test is currently the binding constraint) by between
$5 billion and $53 billion and would have required G-SIBs to hold between $6 billion less and
$84 billion more capital (because the G-SIB surcharge is being added to the SCB). Overall,
capital requirements would have increased by an average of $11 billion in those years.49
Resolution Plans (“Living Wills”)
Policymakers claimed that one reason they intervened to prevent large financial firms from
failing during the financial crisis was because the opacity and complexity of these firms made it
too difficult to wind them down quickly and safely through bankruptcy. The Dodd-Frank Act
required BHCs subject to EPR to periodically submit resolution plans (popularly known as
“living wills”) to the Fed, FSOC, and FDIC that explain how they can safely enter bankruptcy in
the event of their failures. The living wills requirement was implemented through a final rule in
2011, and it became fully effective at the end of 2013.50 The final rule required resolution plans to
include details of the firm’s ownership, structure, assets, and obligations; information on how the
firm’s depository subsidiaries are protected from risks posed by its nonbank subsidiaries; and
information on the firm’s cross-guarantees, counterparties, and processes for determining to
whom collateral has been pledged.

49 Federal Reserve, “Draft Final Rule Regarding the Stress Capital Buffer.”
50 Federal Reserve and FDIC, “Resolution Plans Required,” 76 Federal Register 67323, https://www.gpo.gov/fdsys/
pkg/FR-2011-11-01/pdf/2011-27377.pdf.
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Initially, all banks with over $50 billion in assets were required to submit living wills annually.
Following the implementation of P.L. 115-174, G-SIBs are required to submit living wills once
every two years, alternating between full and targeted plans. Category II and III banks are
required to submit living wills once every three years, alternating between full and targeted plans.
Foreign banks with over $250 billion in global assets that are not Category I, II, or III banks on
the basis of their U.S. operations are required to submit reduced living wills on a three-year cycle.
Category IV banks are exempted from living will requirements.51 In addition, not pursuant to the
Dodd-Frank Act, the FDIC requires resolution plans for insured depository institutions (IDIs)
with $50 billion or more in assets for purposes of facilitating a potential FDIC resolution, a
threshold it maintained after the enactment of P.L. 115-174.52
In the 2011 final rule, the regulators highlighted that the resolution plans would help them
understand the firms’ structure and complexity as well as their resolution processes and strategies,
including cross-border issues for banks operating internationally. The resolution plan is required
to explain how the firm could be resolved under the bankruptcy code53—as opposed to being
liquidated by the FDIC under the Orderly Liquidation Authority (OLA) created by Title II of the
Dodd-Frank Act.54 (Failing IDIs are subject to FDIC resolution, but their parent holding
companies are subject to bankruptcy or OLA.) The plan is required to explain how the firm can
be wound down in a stressed environment in a “rapidly and orderly” fashion without receiving
“extraordinary support” from the government (as some firms received during the crisis) or
without disrupting financial stability. To do so, the plan must include information on core
business lines, funding and capital, critical operations, legal entities, information systems, and
operating jurisdictions.
Resolution plans are divided into a short public part that is disclosed and a private part that
contains confidential information. Some banks have submitted resolution plans containing tens of
thousands of pages. If regulators find that a plan is incomplete, deficient, or not credible, they
may require the firm to revise and resubmit. If the firm cannot resubmit an adequate plan,
regulators have the authority to take remedial steps against it: increasing its capital and liquidity
requirements, restricting its growth or activities, or ultimately taking it into resolution. Since the
process began in 2013, multiple firms’ plans have been found insufficient, including all 11 that
were submitted and subsequently resubmitted in the first wave. In 2016, Wells Fargo became the
first bank to be sanctioned for failing to submit an adequate living will.55
The Fed and FDIC issued proposed guidance in 2023 that elaborated on what non-G-SIB banks
should include in their resolution plans.56

51 Federal Reserve Board and FDIC, “Agencies Finalize Changes to Resolution Plan Requirements; Keeps
Requirements for Largest Firms and Reduces Requirements for Smaller Firms,” joint press release, October 28, 2019,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20191028b.htm.
52 12 C.F.R. §360.10. The FDIC proposed its resolution planning requirements before the enactment of the Dodd-Frank
Act.
53 For some entities, such as insurance subsidiaries, other resolution regimes apply besides the bankruptcy code.
54 OLA was intended to administratively resolve a firm whose failure posed systemic risk as an alternative to the
bankruptcy process. For more information, see CRS In Focus IF10716, Orderly Liquidation Authority, by David W.
Perkins and Raj Gnanarajah.
55 For more information, see CRS Legal Sidebar WSLG1730, Wells Fargo Sanctioned for Deficient “Living Will”, by
David H. Carpenter.
56 Federal Reserve and FDIC, “Guidance for Resolution Plan Submissions of Domestic Triennial Full Filers,” 88
Federal Register 64626, 64641, September 19, 2023, https://www.federalregister.gov/documents/2023/09/19/2023-
19267/guidance-for-resolution-plan-submissions-of-domestic-triennial-full-filers.
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Liquidity Requirements
For banks, liquidity refers to a bank’s ability to meet cash flow needs and readily convert assets
into cash. Banks are vulnerable to liquidity crises because of the liquidity mismatch between
illiquid loans and deposits that can be withdrawn on demand. Although all banks are regulated for
liquidity adequacy, the Dodd-Frank Act required more stringent liquidity requirements for banks
subject to EPR. These liquidity requirements have been implemented through three rules: (1) a
2014 final rule implementing firm-run liquidity stress tests and other internal requirements, (2) a
2014 final rule implementing the Fed-run liquidity coverage ratio (LCR), and (3) a 2021 final
rule implementing the Fed-run net stable funding ratio (NSFR).57
Category I and II banks must comply with the full LCR and NSFR and daily liquidity reporting.
Category I-III banks are also subject to monthly internal liquidity stress tests and liquidity risk
management standards. Category III banks are also subject to a less stringent version of the LCR,
the NSFR, and monthly liquidity reporting requirements unless their wholesale short-term
funding exceeds $75 billion, in which case they are subject to the more stringent requirements.
Category IV banks with over $50 billion in short-term wholesale funding are required to meet a
number of liquidity requirements. They must comply with a reduced LCR and NSFR. All other
Category IV banks are exempted from the LCR and NSFR. All Category IV banks are required to
conduct quarterly company-run liquidity stress tests.
The final rule implementing firm-run liquidity standards was issued in 2014, effective January
2015 for U.S. banks and July 2016 for foreign banks.58 The rule requires a bank subject to EPR to
establish a liquidity risk management framework involving the bank’s management and board,
conduct a monthly internal liquidity stress test, and maintain a buffer of high-quality liquid assets
(HQLA).
The final rule implementing the LCR was issued in 2014.59 The LCR came into effect at the
beginning of 2015 and was fully phased in at the beginning of 2017. The LCR requires banks
subject to EPR to hold enough HQLA to match net cash outflows over a 30-day period in a
hypothetical scenario of market stress where creditors are withdrawing funds.60 An asset can
qualify as an HQLA if it has lower risk, has a high likelihood of remaining liquid during a crisis,
is actively traded in secondary markets, is not subject to excessive price volatility, can be easily
valued, and is accepted by the Fed as collateral for loans. Different types of assets are relatively
more or less liquid, and there is disagreement on what the cutoff point should be to qualify as an
HQLA under the LCR. In the LCR, eligible assets are assigned to one of three categories ranging
from most to least liquid. Assets assigned to the most liquid category are given more credit
toward meeting the requirement, and assets in the least liquid category are given less credit.61

57 OCC, Federal Reserve, and FDIC, “Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure
Requirements,” 86 Federal Register 9120, February 11, 2021, https://www.govinfo.gov/content/pkg/FR-2021-02-11/
pdf/2020-26546.pdf.
58 Federal Reserve, “Enhanced Prudential Standards,” 79 Federal Register 17240, March 27, 2014,
https://www.gpo.gov/fdsys/pkg/FR-2014-03-27/pdf/2014-05699.pdf.
59 OCC, Federal Reserve, and FDIC, “Liquidity Coverage Ratio,” 79 Federal Register 61440, October 10, 2014,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20140903a.htm.
60 The main difference between the liquidity stress tests and the LCR is that the former are company-run and therefore
specifically tailored for each company, whereas the latter is Fed-run and standardized across companies.
61 Section 403 of P.L. 115-174 required regulators to place municipal bonds in a more liquid category so that banks
could get more credit under the LCR for holding them.
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The rule implementing the NSFR was finalized in 2021 after the Fed’s 2019 tailoring rule was
issued.62 The rule requires banks to have a minimum amount of stable funding backing their
assets over a one-year horizon. Different types of funding and assets receive different weights
based on their stability and liquidity, respectively, under a stressed scenario. The rule defines
funding as stable based on how likely it is to be available in a stressed environment and classifies
assets by type, counterparty, and time to maturity. Assets that do not qualify as HQLAs under the
LCR require the most backing by stable funding under the NSFR. Long-term equity gets the most
credit under the NSFR, insured retail deposits get the next most, and other types of deposits and
long-term borrowing get less credit. Borrowing from other financial institutions, derivatives, and
certain brokered deposits cannot be used to meet the rule.
Single Counterparty Exposure Limits
One source of systemic risk associated with TBTF comes from “spillover effects.” When a large
firm fails, it imposes losses on its counterparties. If large enough, the losses could be debilitating
to the counterparties, thus causing stress to spread to other institutions and further threaten
financial stability. Title I of Dodd-Frank requires banks subject to EPR to limit their exposure to
unaffiliated counterparties on an individual counterparty basis and to periodically report on their
credit exposures to counterparties. Counterparty exposure limits remain mandatory, but P.L. 115-
174 placed credit exposure reports at the Fed’s discretion. In 2011, the Fed proposed rules to
implement these provisions with other EPR requirements, but they were not included in
subsequent final rules.63 The 2011 credit exposure reporting proposal would have required banks
to regularly report on the nature and extent of their credit exposures to significant counterparties.
In 2018, the Fed finalized a reproposed rule to implement a single counterparty credit limit
(SCCL),64 effective in 2020. To date, the counterparty exposure reporting requirement has not
been reproposed.65 Following the Fed’s 2019 rule implementing P.L. 115-174, Category I banks
are subject to a more stringent version of the SCCL, and Category II and III banks are subject to a
less stringent version. Category IV banks are not subject to the SCCL. Category I-IV foreign
banks with over $250 billion in global assets are required to meet the single-counterparty credit
limit, but it is imposed in their home countries. A Category I-III IHC is also subject to the U.S.
SCCL.
Counterparty exposure for all banks was subject to regulation before the crisis but did not cover
certain off-balance-sheet exposures or holding-company-level exposures.66 The SCCL is tailored
to have increasingly stringent requirements as asset size increases. For Category II and III banks,
net counterparty credit exposure is limited to 25% of the bank’s capital. For G-SIBs, counterparty
exposure to another G-SIB or a nonbank SIFI is limited to 15% of the G-SIB’s capital, and
exposure to any other counterparty is limited to 25% of its capital.

62 OCC, Federal Reserve, and FDIC, “Net Stable Funding Ratio.”
63 Federal Reserve, “Enhanced Prudential Standards and Early Remediation Requirements,” 77 Federal Register 594,
January 5, 2012, , https://www.gpo.gov/fdsys/pkg/FR-2012-01-05/pdf/2011-33364.pdf; and Federal Reserve and FDIC,
“Resolution Plans and Credit Exposure Reports Required,” 76 Federal Register 22648, April 22, 2011,
https://www.gpo.gov/fdsys/pkg/FR-2011-04-22/pdf/2011-9357.pdf.
64 Federal Reserve, “Single Counterparty Credit Limits,” 83 Federal Register 38460, August 6, 2018,
https://www.govinfo.gov/content/pkg/FR-2018-08-06/pdf/2018-16133.pdf. The rule also implements the Basel III
Large Exposures Standard.
65 The proposed SCCL rule states that future rulemaking implementing the credit exposure reports will be “informed”
by the SCCL framework.
66 Federal Reserve, “Single Counterparty Credit Limits,” 81 Federal Register 14328, March 16, 2016,
https://www.gpo.gov/fdsys/pkg/FR-2016-03-16/pdf/2016-05386.pdf.
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Risk Management Requirements
The Dodd-Frank Act required publicly traded banks with at least $10 billion in assets, which P.L.
115-174 raised to at least $50 billion in assets, to form risk committees on their boards of
directors that include at least one risk management expert responsible for oversight of the banks’
risk management—one of the only EPR requirements that still applies to banks with under $100
billion in assets.67 Title I also requires the Fed to develop overall risk management requirements
for banks with more than $50 billion in assets. The Fed issued the final rule implementing this
provision in 2014, effective in January 2015 for domestic banks and July 2016 for foreign
banks.68 The rule requires the risk committee to be led by an independent director. The rule
requires banks with more than $50 billion in assets to employ chief risk officers responsible for
risk management, which the rule implementing P.L. 115-174 left unchanged.
Provisions Triggered in Response to Financial Stability Concerns
The Dodd-Frank Act provided several powers for—depending on the provision—FSOC, the Fed,
or the FDIC to use when the respective entity believes that a bank with more than $50 billion in
assets or designated nonbank SIFI poses a threat to financial stability. Unless otherwise noted,
P.L. 115-174 raises the threshold at which the powers can be applied to banks with $250 billion in
assets, with no discretion to apply them to banks between $100 billion and $250 billion in assets.
As such, the Fed has applied them to Category I-III banks only. Unlike the enhanced regulation
requirements described earlier in this section, financial stability provisions generally do not
require any ongoing compliance and would be triggered only when a perceived threat to financial
stability has arisen—and none of these provisions has been triggered to date.
Some of the following powers are similar to powers that bank regulators already have over all
banks, but they are new powers over nonbank SIFIs. To varying degrees, they also expand
regulatory authority over banks (or extend authority from bank subsidiaries to BHCs) with more
than $250 billion in assets vis-à-vis smaller banks.
• FSOC reporting requirements. To determine whether a bank with more than
$250 billion in assets poses a threat to financial stability, FSOC may require the
bank to submit certified reports. However, FSOC may make information requests
only if publicly available information is not available.
• Mitigation of grave threats to financial stability. When at least two-thirds of
FSOC members find that a bank with more than $250 billion in assets poses a
grave threat to financial stability, the Fed may limit the firm’s mergers and
acquisitions, restrict specific products it offers, and terminate or limit specific
activities. If none of those steps eliminates the threat, the Fed may require the
firm to divest assets. The firm may request a Fed hearing to contest the Fed’s
actions. To date, this provision has not been triggered, and FSOC has never
identified any bank as posing a grave threat.
• Acquisitions. Title I broadens the requirement for banks with more than $250
billion in assets to provide the Fed with prior notice of a U.S. nonbank
acquisition that exceeds $10 billion in assets and 5% of the acquisition’s voting
shares, subject to various statutory exemptions. The Fed is required to consider
whether the acquisition would pose risks to financial stability or the economy.

67 The board of directors of a publicly traded company oversees the company’s management on behalf of shareholders.
68 Federal Reserve, “Enhanced Prudential Standards.”
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• Emergency 15-to-1 debt-to-equity ratio. For banks with more than $250 billion
in assets, with Fed discretion to apply to banks with between $100 billion and
$250 billion in assets, Title I creates an emergency limit of 15-to-1 on the bank’s
ratio of liabilities to equity capital (sometimes referred to as a leverage ratio).69
The Fed issued a final rule implementing this provision in 2014, effective June
2014 for domestic banks and July 2016 for foreign banks.70 The ratio is applied
only if a bank receives written warning from FSOC that it poses a “grave threat
to U.S. financial stability” and ceases to apply when the bank no longer poses a
grave threat. To date, this provision has not been triggered.
• Early remediation requirements. Early remediation is the principle that
financial problems at banks should be addressed early before they become more
serious. Title I requires the Fed to “establish a series of specific remedial actions”
to reduce the probability that a bank with more than $250 billion in assets
experiencing financial distress will fail. This establishes a requirement for BHCs
similar in spirit to the prompt corrective action requirements that apply to insured
depository subsidiaries. Unlike prompt corrective action, early remediation
requirements are not based solely on capital adequacy. As the financial condition
of a firm deteriorates, statute requires the steps taken under early remediation to
become more stringent. The Fed issued a proposed rule in 2011 to implement this
provision that to date has not been finalized.71
• Expanded FDIC examination and enforcement powers. Title I expands the
FDIC’s examination and enforcement powers over certain large banks. To
determine whether an orderly liquidation under Title II of the Dodd-Frank Act is
necessary, the FDIC is granted authority to examine the condition of BHCs and
foreign banks subject to EPR with more than $250 billion in assets. Title I also
grants the FDIC enforcement powers over BHCs or THCs that pose a risk to the
Deposit Insurance Fund.
Basel III Capital Requirements
Capital requirements are intended to ensure that a bank has enough capital backing its assets to
absorb any unexpected losses on those assets without failing. Title I required enhanced capital
requirements for banks subject to EPR. Outside of capital planning and stress tests, Title I was
generally not prescriptive about what form those requirements should take.72 Parallel to the Dodd-
Frank Act, Basel III reformed bank regulation after the financial crisis. U.S. bank regulators
implemented this nonbinding international agreement through rulemaking.73 Overall capital
requirements were revamped through Basel III, including higher requirements for large banks,

69 Unlike the leverage ratio found in Basel III, this emergency ratio is based on liabilities instead of assets. It is
calculated as total liabilities relative to total equity capital minus goodwill. This ratio is inverted compared with the
leverage ratio—that is, capital is in the numerator rather than the denominator.
70 Federal Reserve, “Enhanced Prudential Standards.”
71 Federal Reserve, “Enhanced Prudential Standards and Early Remediation Requirements.”
72 Section 165(k) of the Dodd-Frank Act as amended requires the Fed to take off-balance-sheet exposures into account
in capital requirements for any bank subject to EPR. The SLR is consistent with this requirement.
73 Many provisions of the Basel III Accord were adopted in rulemaking in July 2013. The 2013 final rule does not
include the capital surcharge for G-SIBs. Information on Basel III implementation is available at
http://federalreserve.gov/bankinforeg/basel/USImplementation.htm.
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discussed in this section. Basel III did not include enhanced capital requirements at the original
$50 billion threshold, but it did include more stringent capital requirements for the largest banks.
These capital requirements determine how the largest banks must fund all of their activities on a
day-to-day basis. In that sense, these requirements arguably have a larger ongoing impact on
banks’ marginal costs of providing credit and other services than most of the Title I provisions
discussed in the last section that impose only compliance costs on banks.74 For more information,
see CRS Report R47447, Bank Capital Requirements: A Primer and Policy Issues, by Andrew P.
Scott and Marc Labonte.
The following Basel III capital requirements apply only to large banks.
Advanced Approaches
Since Basel II (the previous iteration of the international accord), large, complex banks have been
required to use advanced approaches—more technical, complex procedures—to determine
capital requirements for more sophisticated financial activities. Before 2019, advanced
approaches were required for institutions that had consolidated total assets equal to $250 billion
or more or consolidated total on-balance-sheet foreign exposures equal to $10 billion or more. In
the 2019 tiering rule, the Fed changed this so that only Category I and II banks are required to use
advanced approaches. Other banks may still elect to use advanced approaches.75
Before the enactment of P.L. 115-174, many large bank capital requirements applied only to
advanced approaches banks, but the 2019 rule based those requirements on Category I-IV instead.
There are other examples of cases where advanced approaches banks follow more complicated
methodology to comply with capital rules than those used by smaller banks. For example, another
rule in 2019 simplified the capital treatment of certain assets, such as mortgage servicing assets
and deferred tax assets, to reduce regulatory burden. Advanced approaches banks were not
allowed to use this simplified capital treatment.76 As another example, the rule implementing
Basel III required unrealized gains and losses on available for sale (AFS) securities—as well as
certain other items included in accumulated other comprehensive income (AOCI)—to count
toward capital requirements for advanced approaches banks. Other banks were given a one-time
opportunity to opt out of this requirement.
Supplementary Leverage Ratio
Basel III introduced a supplementary leverage ratio (SLR) for large banks. G-SIBs, Category II
and III banks, and any other bank that elects to be an advanced approaches bank must meet a 3%
SLR at the holding company level and at the depository subsidiary level to be considered
adequately capitalized. In addition, G-SIBs must also meet an enhanced SLR (eSLR) of 5% at the
holding company level (specifically, G-SIBs must meet a 2% buffer on top of the 3% SLR

74 Regulatory compliance costs refers to resources and manpower directly expended on ensuring that a bank is
complying with regulation.
75 Some additional specific treatments under capital rules apply to those banks that have elected to be advanced
approaches banks. For simplicity, those additional capital requirements are not noted in the summary tables throughout
this report.
76 OCC, Federal Reserve, and FDIC, “Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the
Economic Growth and Regulatory Paperwork Reduction Act of 1996,” 84 Federal Register 35234, July 22, 2019,
https://www.govinfo.gov/content/pkg/FR-2019-07-22/pdf/2019-15131.pdf.
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requirement) to avoid restrictions on discretionary bonuses and capital distributions and 6% at the
depository subsidiary level to be considered well capitalized.77
The leverage ratio and SLR use tier 1 capital in the numerator and include unweighted assets in
the denominator.78 The difference is that the SLR also includes off-balance-sheet exposures in the
denominator. Thus, the numerator is the same, but the denominator is larger.79 The SLR is
intended to ensure that the bank is adequately safeguarded against off-balance-sheet losses that
are not captured in the leverage ratio. Unanticipated losses related to opaque off-balance-sheet
exposures exacerbated uncertainty about banks’ solvency during the 2007-2009 financial crisis.
According to the regulators, there is less need to subject small banks to the SLR because small
banks on average have fewer off-balance-sheet exposures.
Although the basic principle of leverage ratios is to treat all assets equally, policymakers have
debated whether certain assets should be exempted. Section 402 of P.L. 115-174 allowed for
custody banks—defined by the legislation as banks predominantly engaged in custody,
safekeeping, and asset servicing activities—to no longer hold capital against funds deposited at
certain central banks80 to meet the SLR up to an amount equal to customer deposits linked to
fiduciary, custodial, and safekeeping accounts.81 All other banks would continue to be required to
hold capital against central bank deposits. According to the implementing rule, the Bank of New
York Mellon, Northern Trust, and State Street were the only banks that qualified for this
exemption at the time.82
In response to the rapid increase in safe assets on bank balance sheets during the pandemic, the
banking regulators provided temporary SLR relief by excluding Treasury securities and balances
held at the Fed from the denominator.83 That relief expired at the end of March 2021, although
bank balance sheets still remain larger than before the pandemic.
G-SIB Capital Surcharges
In the United States, the Fed bases a G-SIB’s surcharge on the score generated using two
formulas (called method 1 and method 2) to measure an institution’s systemic importance—the
likelihood that distress at or failure of the institution could destabilize the global financial

77 OCC, Federal Reserve, and FDIC, “Regulatory Capital Rules,” 79 Federal Register 24528, May 1, 2014,
https://www.gpo.gov/fdsys/pkg/FR-2014-05-01/pdf/2014-09367.pdf. However, the OCC applies the eSLR to national
banks with over $700 billion in assets or $10 trillion in custody assets. The OCC is proposing to apply the eSLR to
subsidiaries of G-SIBs instead, aligning it with the Fed’s methodology, in the Basel III Endgame proposal.
78 These concepts are described in CRS Report R47447, Bank Capital Requirements: A Primer and Policy Issues, by
Andrew P. Scott and Marc Labonte.
79 Because of the larger denominator, regulators estimated that an SLR of 3% is equivalent to a leverage ratio of 4.3%,
on average. Thus, the 3% SLR requires affected banks to hold more capital on average than the 4% leverage ratio does.
80 The central banks that currently qualify for this exemption include all countries belonging to the Organization for
Economic Cooperation and Development (OECD) except Mexico and Turkey. For a list, see OECD, Country Risk
Classifications of the Participants to the Arrangement on Officially Supported Export Credits, January 26, 2018,
http://www.oecd.org/trade/xcred/cre-crc-current-english.pdf.
81 For more information, see CRS In Focus IF10812, Financial Reform: Custody Banks and the Supplementary
Leverage Ratio, by Rena S. Miller.
82 Federal Reserve, FDIC, and OCC, “Agencies Finalize Changes to Supplementary Leverage Ratio as Required by
Economic Growth, Regulatory Relief, and Consumer Protection Act,” press release, November 19, 2019,
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20191119a.htm.
83 Federal Reserve , FDIC, and OCC, “Regulators Temporarily Change the Supplementary Leverage Ratio to Increase
Banking Organizations’ Ability to Support Credit to Households and Businesses in Light of the Coronavirus
Response,” press release, May 15, 2020, https://www.federalreserve.gov/newsevents/pressreleases/
bcreg20200515a.htm.
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system.84 A detailed examination of how the scores are calculated and what qualifies a bank as a
G-SIB is beyond the scope of this report. What is pertinent is that the size of the institution
constitutes one of 12 indicators measured under method 1 and one of nine indicators in method
2.85
Basel III also required G-SIBs to hold relatively more capital for their risk-weighted requirements
than other banks in the form of a common equity surcharge of at least 1% to “reflect the greater
risks that they pose to the financial system.”86 In July 2015, the Fed issued a final rule that began
phasing in this capital surcharge in 2016.87 Each G-SIB is assigned a surcharge whose size is
based on these formulas. Under the rule, the capital surcharge can be between 1% and 4.5%. The
Fed stated that under its rule, most G-SIBs would face a higher capital surcharge than required by
Basel III. For 2023, the surcharge varied between 1% and 4%.88
If capital levels fall below the surcharge, G-SIBs face certain limitations on shareholder payouts
and bonus payments.89
Countercyclical Capital Buffer (CCYB)
The banking regulators also issued a final rule implementing a Basel III CCYB, which now
applies to Category I, II, and III banks. The CCYB requires these banks to hold more capital than
other banks do when regulators believe that financial conditions make the risk of losses
abnormally high. In normal times, the CCYB is to be set at zero, but in high-risk circumstances, it
could be set as high as 2.5%.90 In practice, it has always been set at zero since inception.
Total Loss Absorbing Capacity
The Fed issued a 2017 final rule implementing a total loss absorbing capacity (TLAC)
requirement for U.S. G-SIBs and U.S. operations of foreign G-SIBs effective at the beginning of
2019.91 The rule requires U.S. G-SIBs to hold TLAC equal to at least 18% of RWA and 7.5% of
unweighted assets (including off-balance-sheet exposures) at the holding company level. TLAC is

84 Federal Reserve, “Regulatory Capital Rules: Implementation of Risk-Based Capital Surcharges for Global
Systemically Important Bank Holding Companies; Final Rule,” 80 Federal Register 49082, August 14, 2015,
https://www.gpo.gov/fdsys/pkg/FR-2015-08-14/pdf/2015-18702.pdf.
85 The first scoring method closely adheres to the standards agreed to in Basel III. The second method is based on the
Basel III system but includes certain changes made by the Fed that place more emphasis on the banks’ funding sources.
Both scoring methods include indicators of interconnectedness, complexity, and cross-jurisdictional activity. Method 1
also measures substitutability—how easily an institution’s client servicing or infrastructure support could be picked up
by another institution—and method 2 measures an institution’s use of certain funding markets. The Fed’s G-SIB
scoring uses bank exposures as the size indicator rather than assets, although the asset-size indicator is more commonly
used in most U.S. bank regulation thresholds.
86 Bank for International Settlements, Basel III Summary Table, http://www.bis.org/bcbs/basel3/b3summarytable.pdf.
87 Federal Reserve, “Risk-Based Capital Guidelines: Implementation of Capital Requirements for Global Systemically
Important Bank Holding Companies,” 80 Federal Register 49082, August 14, 2015, https://www.federalreserve.gov/
newsevents/press/bcreg/20150720a.htm.
88 Federal Reserve, Large Bank Capital Requirements, July 2023, https://www.federalreserve.gov/publications/files/
large-bank-capital-requirements-20230727.pdf.
89 Federal Reserve, “Regulatory Capital Rules.”
90 Federal Reserve, “Regulatory Capital Rules: The Federal Reserve Board’s Framework for Implementing the U.S.
Basel III Countercyclical Capital Buffer,” 81 Federal Register 63682, September 16, 2016,
https://www.federalreserve.gov/newsevents/press/bcreg/20160908b.htm.
91 12 C.F.R. Chapter II, Subchapter A, Part 252. Federal Reserve, “Total Loss-Absorbing Capacity, Long-Term Debt,
and Clean Holding Company Requirements for Systemically Important U.S. Bank Holding Companies,” 82 Federal
Register 8266, January 24, 2017, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20161215a.htm.
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composed of tier 1 capital and a minimum amount of long-term debt (equal to the greater of 4.5%
of unweighted assets including off-balance-sheet exposures or 6% plus the G-SIB surcharge of
RWA) issued by the holding company.92 In addition, G-SIBs would be subject to a TLAC buffer.
If TLAC fell below the buffer level, the G-SIB would face restrictions on capital distributions and
discretionary bonuses.
Tier 1 capital held to meet other capital requirements counts toward the TLAC requirement up to
the eligible limit. However, TLAC requires banks to hold capital and eligible long-term debt
(LTD) at the holding company level.93
TLAC is intended to make these equity and debt holders absorb losses by writing off existing
equity and converting debt to equity in the event of the firm’s insolvency, a process referred to as
bank “bail ins.” This furthers the policy goal of avoiding taxpayer bailouts of large financial
firms. In 2020, to reduce systemic risk from interconnectedness, a final rule discouraged Category
I and II banks from investing in the TLAC of U.S. or foreign G-SIBs.94
Supervision
Although this report is focused on regulatory requirements, bank supervision also plays an
important role in safety and soundness. Although heightened supervisory standards are not
required by statute, the Fed has also implemented them for large banking organizations with over
$100 billion—aligned in 2019 with the Category IV threshold—that it regulates, including all
BHCs.95 The most stringent supervisory standards are currently applied only to U.S. G-SIBs
through the Large Institution Supervision Coordinating Committee. The Fed has two goals in this
framework: to reduce the probability of a large bank failing and to reduce the effects on financial
stability in the event of its failure.96 Heightened supervision includes continuous monitoring and
coordinated horizontal reviews.
Assessments
By law, regulators levy assessments on banks to fund specific activities or their overall budgets,
depending on the assessment. The Dodd-Frank Act imposes various assessments on banks with
more than $50 billion in assets. P.L. 115-174 raised the threshold for some of these assessments.
As amended, fees are assessed on:
• BHCs with more than $250 billion in assets and designated SIFIs to fund the
Office of Financial Research.

92 These concepts are described in CRS Report R47447, Bank Capital Requirements: A Primer and Policy Issues, by
Andrew P. Scott and Marc Labonte.
93 Capital required by TLAC is not in addition to capital required under standard capital requirements, and standard
capital requirements are the same or higher than TLAC. However, TLAC capital must be issued by the holding
company, whereas banks must meet standard capital requirements at both the depository subsidiary level and the
holding company level. Some banks might have to hold more capital to meet both of these requirements
simultaneously.
94 Federal Reserve Board, FDIC, and OCC, “Agencies Finalize Rule to Reduce the Impact of Large Bank Failures,”
joint press release, October 20, 2020, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201020a.htm.
95 Federal Reserve Board, “SR 12-17 / CA 12-14: Consolidated Supervision Framework for Large Financial
Institutions,” December 17, 2012, https://www.federalreserve.gov/supervisionreg/srletters/sr1217.htm.
96 Federal Reserve, “Large Financial Institutions,” https://www.federalreserve.gov/supervisionreg/large-financial-
institutions.htm.
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• BHCs and THCs with assets over $100 billion and designated SIFIs to fund the
cost of administering EPR. Assessments on BHCs and THCs with $100 billion to
$250 billion in assets must reflect the tailoring of EPR.
• BHCs with assets over $50 billion and designated SIFIs to repay any
uncompensated costs borne by the government in the event of a liquidation under
the OLA.97 This assessment is imposed only after a liquidation occurs, which has
not happened to date.
Role of EPR in 2023 Bank Failures
It is difficult to evaluate how well prudential regulatory requirements work in practice until a
bank comes under stress. After experiencing no U.S. bank failures in 2021 and 2022 and no large
banks experiencing financial stress since the financial crisis, the spring of 2023 witnessed the
second (First Republic), third (SVB), and fifth (Signature) largest failures in history (as measured
by asset size in nominal dollars).98 Combined, these failures are expected to ultimately impose
tens of billions of dollars of losses on the FDIC. To avoid a broader run on the banking system,
the FDIC invoked its rarely used systemic risk exception to guarantee all uninsured depositors at
two of the banks.99 Members of Congress debated whether P.L. 115-174 and the Fed’s
implementing rule in 2019 contributed to SVB’s failure.100 The answer to that question depends
on whether this was a failure of regulation (inadequate safety and soundness rules), supervision
(faulty application of existing rules by supervisors), or both. EPR sets regulatory standards but
not supervisory standards. At the same time, many of the most important regulatory and
supervisory standards applied to large banks are not the product of EPR—they apply to all banks.
Although each had over $100 billion in assets at the time of failure, Signature Bank and First
Republic were not structured as BHCs, so they were not subject to most EPR requirements per
Title I of the Dodd-Frank Act as originally enacted, and their primary regulator was the FDIC.
SVB was the first bank subject to EPR to fail since the Dodd-Frank Act was implemented. The
Fed was the primary regulator of SVB and its holding company, SVB Financial Group. In April
2023, the Fed issued a report on the causes of SVB’s failure.101 (All figures cited in this section
are from that report unless otherwise noted.) SVB surpassed $50 billion in assets in 2017, $100
billion in 2020, and $200 billion in 2021. Due to its rapid growth, SVB Financial Group became a
Category IV BHC in June 2021 and had begun to be supervised under the Fed’s Large Banking
Organizations framework in February 2021.102

97 If assessments on those institutions and the resolved firms’ creditors are inadequate to recover the costs of
liquidation, there is the potential to levy assessments on other financial firms with assets over $50 billion.
98 CRS analysis of data from FDIC, “BankFind Suite,” https://banks.data.fdic.gov/. In addition, the failure of Credit
Suisse, a foreign G-SIB, was avoided through a Swiss-government-assisted takeover by UBS in the spring of 2023.
99 See CRS In Focus IF12378, Bank Failures: The FDIC’s Systemic Risk Exception, by Marc Labonte.
100 See, for example, U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Examining the
Failures of Silicon Valley Bank and Signature Bank, 118th Cong., 1st sess., May 16, 2023; U.S. Congress, House
Committee on Financial Services, The Federal Regulators’ Response to Recent Bank Failures, 118th Cong., 1st sess.,
March 29, 2023.
101 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank, April 2023,
https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf.
102 According to the Fed’s SVB report, the Fed granted SVB an extension to comply with EPR requirements after it
surpassed $50 billion in assets, so SVB was not subject to EPR before the Fed’s 2019 rule was finalized, which
exempted SVB from most of the rule because it had less than $100 billion in assets at that time. See Federal Reserve,
“Large Financial Institutions.”
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According to the Fed’s inspector general, SVB failed because it
was vulnerable to the business cycles of its customer base—concentrated in science and
tech—with a high share of uninsured deposits and large, irregular cash flows. SVB also
invested a large portion of deposits in securities with long-term maturities, and experienced
significant unrealized losses on those securities as interest rates rose. Further, the bank’s
management and board of directors failed to manage the risks of its rapid, unchecked
growth and concentrations.103
Concerns that unrealized losses on securities holdings would result in SVB becoming
undercapitalized if uninsured depositors withdrew their funds became a self-fulfilling prophecy.
SVB experienced $40 billion in deposit withdrawals a day after it announced that it would sell
securities at a $1.8 billion loss and raise more capital.104
Proponents of P.L. 115-174 argued that banks with under $250 billion in assets were less likely to
pose systemic risk or posed less systemic risk than did banks above $250 billion and therefore did
not need to be subject to the same level of regulatory stringency. The failures of SVB and
Signature triggered fears of a general bank run—the classic example of a systemic event that EPR
is intended to prevent—that led the FDIC, in consultation with the Fed and Treasury Secretary, to
invoke the systemic risk exception in order to guarantee uninsured depositors.105 In this case, the
systemic risk arguably stemmed from contagion—the risk that bank runs would spread to other
banks—not interconnectedness. EPR was intended to make bailouts less likely. In this case,
uninsured depositors were bailed out, but creditors, shareholders, and the banks themselves were
not directly bailed out. In the case of Signature, the Dodd-Frank Act’s original premise that large
financial firms that posed systemic risk were either BHCs or would be designated as SIFIs by
FSOC and subject to EPR did not prove to be the case.
SVB’s safety and soundness problems had been mounting for some time before its sudden
collapse, but Fed supervisors did not effectively respond to address them. Two issues with EPR
and SVB revolve around how the Fed implemented P.L. 115-174.
First, that act required the Fed to tailor EPR requirements and gave the Fed discretion on whether
to apply individual requirements to banks with between $100 billion and $250 billion in assets.106
The act did not require the Fed to lower EPR standards on Category IV banks, but in Fed Vice
Chair Michael Barr’s opinion, the Fed shifted its regulatory and supervisory policies in response
to P.L. 115-174 and “internal policy choices” in a way that “impeded effective supervision.”107
According to the Fed’s inspector general, “A Board official stated that the message the Board
took from [P.L. 115-174] becoming law in 2018 was to reduce the regulatory and supervisory
burden.”108 In implementing P.L. 115-174, the Fed chose to exempt Category IV banks from
many EPR requirements or apply less stringent standards to them. It also aligned its tiered
supervision with the thresholds set out in P.L. 115-174.

103 Federal Reserve, Office of Inspector General, “Material Loss Review of Silicon Valley Bank,” September 25, 2023,
https://oig.federalreserve.gov/reports/board-material-loss-review-silicon-valley-bank-sep2023.htm.
104 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
105 Department of the Treasury, Federal Reserve, and FDIC, “Joint Statement by Treasury, Federal Reserve, and
FDIC,” joint press release, March 12, 2023, https://www.federalreserve.gov/newsevents/pressreleases/
monetary20230312b.htm.
106 As noted above, the Fed had never applied many of the Basel III large bank capital requirements to banks with
under $250 billion in assets or other measures of complexity.
107 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
108 Federal Reserve, Office of Inspector General, “Material Loss Review of Silicon Valley Bank.”
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Second, when banks crossed the $100 billion threshold to be eligible for EPR, the Fed chose to
phase in EPR standards and heightened supervision slowly. This played a critical role in the
regulation of SVB because of its rapid growth.109 As a result, SVB was “subject to a less stringent
set of [EPR standards] when it reached the $100 billion threshold than would have applied before
2019.”110 This also meant that SVB was not added to the Large Banking Organizations
supervisory group for longer, “which delayed application of heightened supervisory expectations
to the firm by at least three years.”111 Although SVB crossed the $100 billion threshold in June
2021, because of phase-ins, most EPR requirements did not apply to it until its problems were
already mounting. It was not subject to capital planning until April 2022, firm liquidity
requirements until July 2022, and resolution planning until December 2022. It would not have
been subject to the 70% LCR and NSFR until October 2023,112 stress testing until June 2024, and
the stress capital buffer until October 2024.
EPR covers a relatively narrow set of issues, and some argue that the problems that contributed to
the failure of SVB were more likely to have been caught by general regulatory and supervisory
standards applying to all banks rather than EPR. If so, SVB’s failure might be attributable to
supervisory inadequacies rather than lack of appropriate regulatory standards. The Fed’s SVB
report details multiple examples of SVB’s specific problems that Fed supervisors “did not fully
appreciate the extent of” or “did not take sufficient steps to ensure that SVB fixed,” in the words
of Vice Chair Barr.113 On the other hand, there are specific EPR requirements to test the adequacy
of a bank’s capital and liquidity, but those tests did not turn out to be well targeted to SVB’s
specific problems. A closer look at the specific EPR requirements provides some insight into the
potential role of EPR and P.L. 115-174 in SVB’s failure.
Under the Fed’s rule implementing P.L. 115-174, Category IV BHCs were exempted from
company-run stress tests. In Fed-run stress tests, the Fed projects what would happen to a
number of economic and financial variables under a severely adverse outcome and projects bank
losses under that outcome. The Fed’s 2019 rule reduced the frequency of Fed-run stress tests from
annual to biannual for Category IV BHCs. After P.L. 115-174 the Fed reduced the number of
stress test scenarios it used. Under the 2022 severely adverse scenario, interest rates on Treasury
securities were assumed to fall and be very low. Part of SVB’s losses stemmed from rising
Treasury rates (i.e., interest rate risk). The Fed’s report posits that, had SVB been subject to firm-
run stress tests, it might have picked up on interest rate risks, although the report also criticizes
SVB’s risk management deficiencies at length.
The proximate cause of SVB’s failure was the large and sudden withdrawal of deposits (i.e.,
liquidity risk). EPR requires liquidity standards to help ensure that banks do not fail because of
cash flow problems. BHCs are subject to three groups of liquidity requirements under EPR: (1)
the LCR to ensure sufficient liquid assets that can be sold in a crisis, (2) the NSFR to ensure that
banks have access to sufficient stable funding in a crisis, and (3) internal firm requirements. In the

109 Rapid growth itself has been identified as a leading predictor of bank failure by the FDIC’s inspector general and the
Government Accountability Office (GAO) but did not precipitate supervisory scrutiny by the Fed. See FDIC, Office of
Inspector General, Comprehensive Study on the Impact of the Failure of Insured Depository Institutions, January 2013,
Table 6, https://www.fdicoig.gov/sites/default/files/reports/2022-08/13-002EV.pdf; GAO, Financial Institutions:
Causes and Consequences of Recent Bank Failures, GAO-13-71, January 3, 2013, https://www.gao.gov/products/gao-
13-71.
110 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
111 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
112 As a Category IV bank, it was subject to the LCR and NSFR in October 2023 only because its short-term funding
exceeded $50 billion beginning in December 2022.
113 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
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2019 rule, the Fed no longer required Category IV BHCs to meet (a less stringent version of) the
LCR unless they had “$50 billion or more in average weighted short-term wholesale funding” and
imposed less stringent internal liquidity requirements on them. The NSFR was not finalized until
2020, and Category IV BHCs were exempted unless they had $50 billion or more in wholesale
funding. (Category IV bank subsidiaries are also exempt from the LCR and NSFR.) Had SVB
been subject to these post–P.L. 115-174 requirements before its failure, the Fed estimates that it
would have met the 70% LCR and NSFR requirements and capital requirements. Had SVB been
subject to the pre–P.L. 115-174 Dodd-Frank requirements before its failure, it would have had a
$14 billion shortfall in February 2023 under the LCR but would have been in compliance with the
NSFR.
As defined, neither the LCR nor the NSFR was necessarily geared to catching the sort of
problems experienced by SVB. Some of the assets and liabilities that posed problems for SVB
Financial would have been treated relatively favorably under the LCR and NSFR. For example,
Treasury securities receive the most favorable treatment under the LCR—the LCR is not
concerned with whether the market value of a BHC’s Treasury securities has fallen. Likewise,
most types of deposits receive a 90% or 95% weighting under the NSFR—the NSFR was more
concerned with bank overexposure to short-term wholesale funding (debt). More liquid assets are
required to be held against uninsured deposits than insured deposits under the LCR, but the LCR
assumes a slower rate of uninsured deposit withdrawal than SVB experienced.114
Concentration risk is addressed under EPR by the SCCL requirement. The Fed’s SCCL rule,
which was finalized after the enactment of P.L. 115-174, exempted Category IV BHCs. This
requirement addresses only excessive exposure to a single counterparty, such as a single business,
not excessive exposure to a single industry, as was the case with SVB’s exposure to the tech
industry. The Fed did not identify concentration to a single counterparty as an issue in SVB’s
failure.
Risk management is the only Dodd-Frank EPR requirement that applies to banks with $50
billion or more in assets under P.L. 115-174. Despite being subject to this requirement, SVB did
not have a permanent chief risk officer in place from April 2022 to January 2023.
Category IV banks have not been subject to resolution planning requirements since the Fed’s
implementation of P.L. 115-174. SVB submitted its first FDIC IDI resolution plan in December
2022, based on 2021 data. According to FDIC Chair Martin Gruenberg, “While Silicon Valley
Bank and First Republic had been required to file resolution plans which provided basic
information that was useful, far more robust plans would have been helpful in dealing with the
failure of these institutions. Signature Bank failed before it would have been required to file its
first resolution plan in June.”115 He argues that proposed changes to IDI resolution plans
discussed below would have assisted with a smoother resolution.
Interest rate risk could potentially have been captured earlier by a Basel III large bank
requirement (as opposed to a Dodd-Frank EPR requirement) to recognize unrealized losses on
securities. Under the Fed’s rule implementing P.L. 115-174, banks and BHCs that were not
Category I or II banks could opt out of AOCI requirements (discussed below in the “AOCI and
Unrealized Capital Losses” section), which SVB did. Among other things, AOCI requires covered
banks to include unrealized gains and losses on AFS securities in net income. The Fed reports that
under the pre–P.L. 115-174 framework, SVB would have been subject to AOCI as of the second

114 Pat Parkinson, “What to Do About Uninsured Deposits?,” Bank Policy Institute, October 5, 2023, https://bpi.com/
what-to-do-about-uninsured-deposits/.
115 FDIC Chairman Martin J. Gruenberg, “The Resolution of Large Regional Banks—Lessons Learned,” speech,
August 14, 2023, https://www.fdic.gov/news/speeches/2023/spaug1423.html.
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quarter of 2020 because it had more than $10 billion in foreign exposure, making it an advanced
approaches bank. Had it recognized unrealized capital losses, it would have reduced SVB’s
capital under advanced approaches by $1.9 billion at the end of 2022, but SVB would have
remained well capitalized after this loss even if advanced approaches had been its binding
requirement.116 Further, most of SVB’s unrealized losses were associated with held to maturity
assets, which do not have to be recognized in capital under AOCI, as will be discussed below.
Proposed Changes to Large Bank Regulation
Since the large bank failures of 2023, the banking regulators have newly emphasized applying
proposals to all banks with more than $100 billion in assets (including those that are not
structured as BHCs) despite the requirement in P.L. 115-174 for regulations to be imposed only
on banks with between $100 billion and $250 billion in assets on a case-by-case basis and only if
it would promote financial stability or the institution’s safety and soundness, taking into
consideration its riskiness and characteristics. This is in contrast to the period after the enactment
of P.L. 115-174, when regulators were focused on rolling back requirements for banks in the $50
billion to $250 billion asset range. In addition to the large bank failures, one justification for the
new approach is that several Category III and IV banks (popularly called “regional banks”) have
grown significantly through mergers and organic expansion in recent years, increasing their
systemic importance. Critics believe that the new proposals—and some aspects of the existing
rules—are not tailored enough to reflect differences in banks. Critics also believe that complex,
overlapping rules have in some cases led to unintended consequences.
Currently, the bank regulators have several proposed rules outstanding that would modify EPR:
• In 2018, the Fed and the OCC proposed a rule to incorporate the G-SIB surcharge
into the enhanced SLR for G-SIBs. It has not been finalized.
• The Fed’s new vice chair for supervision, Michael Barr, conducted a “holistic
capital review” from 2022 to 2023, which resulted in several recommended
changes (proposed rules).
• The federal banking regulators issued a joint proposal to implement the “Basel III
Endgame” in July 2023:
• In that proposal, the regulators proposed requiring banks with over $100
billion in assets to recognize unrealized capital gains and losses on certain
securities in their capital.
• Also in that proposal, the regulators proposed making Category IV banks
subject to the CCYB and SLR.
• On the same day, in a separate proposal, the Fed proposed changing how the G-
SIB surcharge is calculated.
• In August 2023, the banking regulators proposed subjecting all banks with $100
billion or more in assets to LTD requirements and clean holding company
requirements.
• In August 2023 the FDIC proposed to revise its resolution planning requirements
for IDIs.

116 The Fed did not determine whether advanced approaches would have been its binding requirement under this
counterfactual. If it had not been, then recognizing unrealized losses would have had no effect on its required capital
levels.
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This section summarizes these proposed rules and their projected effects. The scope of this
section is limited to proposed rulemakings.
Incorporating the G-SIB Surcharge into the eSLR and TLAC
As noted in the “Basel III Capital Requirements” section, G-SIBs must currently comply with a
higher SLR than do other banks with $250 billion in assets. For G-SIBs, the current eSLR is set at
5% at the holding company level and 6% for the depository subsidiary to be considered well
capitalized.
In April 2018, the Fed and the OCC proposed a rule to modify the eSLR for G-SIBs.117 Instead of
5% and 6%, respectively, the eSLR would now be set for each G-SIB at 3% plus half of its G-SIB
surcharge for both the holding company and the depository subsidiary. In this way, the amount of
capital required to be held by G-SIBs would depend on their systemic importance. Because each
G-SIB has a surcharge that is between 1% and 4%, the proposed rule would reduce capital
requirements under the eSLR for each G-SIB to between 3.5% and 5%, respectively, depending
on the bank. (At the holding company level, only JPMorgan Chase’s eSLR would remain at 5%.
For its depository subsidiary it would decline from 6% to 5%.) Figure 3 compares the current
SLR requirement for G-SIBs to the anticipated SLR requirement for each G-SIB if the proposed
rule were finalized.
Figure 3. SLR Requirement for G-SIBs, Current and Under Proposed Rule
Anticipated in 2019

Source: CRS calculations based on OCC, Federal Reserve, Regulatory Capital Rules, 83 Federal Register 17317,
April 19, 2018; and Federal Reserve, Large Bank Capital Requirements, July 2023.
Notes: For each G-SIB, the proposed SLR is equal to 3% plus half of the G-SIB surcharge. State = State Street, B
of NYM = Bank of New York Mel on, Wel s = Wells Fargo, B of A = Bank of America, Goldman = Goldman
Sachs, Citi = Citigroup, MS = Morgan Stanley, JPM = JP Morgan Chase, HC = holding company, Dep Sub =
depository subsidiary.

117 OCC, Federal Reserve, “Regulatory Capital Rules,” 83 Federal Register 17317, April 19, 2018,
https://www.govinfo.gov/content/pkg/FR-2018-04-19/pdf/2018-08066.pdf.
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Whether this reduces how much capital the G-SIBs are required to hold depends on whether the
SLR is the binding capital ratio. The Fed reported that in 2017, the SLR was the binding ratio for
each G-SIB’s bank subsidiary. Thus, the proposed rule would have reduced how much capital
each G-SIB had to hold at the subsidiary level by $121 billion in total. The effect on the overall
BHC would have been much smaller. At the holding company level, the proposed rule would
have reduced required capital by $400 million in total.118
What Is a “Binding” Capital Requirement?
When banks face multiple capital requirements, the minimum amount of capital that they are required to hold is
determined by whichever capital requirement is the “binding” one. Conceptually, whichever of the 14 different
capital requirements that G-SIBs must currently comply with requires the most capital becomes the only one that
determines the bank’s overall required capital (because all of the others require less capital than that one).119 The
binding requirement wil vary from bank to bank depending on the types of capital and assets it holds. Typically, a
bank aims to hold enough capital to always stay comfortably above whatever amount is required by the binding
ratio.
Three of the proposals discussed in this report involve changes to specific capital requirements. Reducing or
combining individual capital requirements does not necessarily mean that large banks would have to hold less
capital. That depends on three factors:
(1) Which capital requirement is currently binding?
(2) Which capital requirement would become binding under the proposal?
(3) Does the proposal also make changes to the newly binding capital requirement that would increase or reduce
the amount of capital that banks must hold?
Proposals to change capital requirements would reduce how much capital a bank is required to hold overall if the
proposal reduces the amount of capital required under the capital requirement that is binding under the proposal.
By contrast, if a proposal reduces a requirement that is not binding before or after the change, it would not
change how much capital a bank is required to hold.
The Fed argues that it is undesirable for the SLR to be the binding capital requirement because it
is intended to act as a backstop if risk-weighted requirements fail. If the SLR is the binding ratio,
banks have more incentive to hold riskier assets. To avoid having the SLR be the binding ratio,
banking regulators could raise risk-weighted capital requirements or reduce the SLR, as is
proposed. The Fed estimates that under the proposal, the SLR would still be the binding ratio for
three G-SIBs.
The proposed rule would make similar changes to G-SIBs’ TLAC requirement. Currently, G-SIBs
must meet a 9.5% leverage buffer under TLAC. Under the proposed rule, G-SIBs would be
required to meet a leverage buffer equal to 7.5% plus half of their G-SIB surcharge. Because all
G-SIBs currently have a surcharge below 4%, this would reduce their TLAC requirement. The
proposed rule would also make a similar change to the TLAC LTD requirement for G-SIBs.
It is unclear if the Fed still intends to finalize this proposal.
Holistic Capital Review
In 2022, Fed Vice Chair Barr announced a “holistic review of capital standards” for large
banks.120 One motivation for the review was to evaluate whether policy goals are still achieved
given the interaction of multiple large bank capital requirements. In a speech in July 2023, he

118 Federal Reserve, “Proposed Rule Regarding the Stress Buffer Requirements,” p. 6.
119 In reality, because the current 18-24 capital requirements are all variants of a few core concepts, the “binding”
requirement will also likely determine the amount of capital needed within that group of requirements.
120 Vice Chair for Supervision Michael S. Barr, “Why Bank Capital Matters,” speech at the American Enterprise
Institute, December 1, 2022, https://www.federalreserve.gov/newsevents/speech/barr20221201a.htm.
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announced the outcome of that review, which resulted in recommendations for a series of future
rulemakings.121 Barr is not recommending fundamental changes in large bank capital
requirements and announced that several requirements would not be changed at all. He
highlighted implementation of the Basel III Endgame as “an important aspect of my proposals.”
Basel III Endgame
On July 27, 2023, the OCC, FDIC, and Fed jointly issued a proposed rule that would implement a
last round of Basel III capital requirement reforms, sometimes colloquially referred to as the
Basel III Endgame.122 Some of the more technical details of Basel III were not filled in until the
intergovernmental Basel Committee on Bank Supervision issued the final major set of Basel III
standards in December 2017. Many of the details in the 2017 proposal were in response to
problems that arose during the financial crisis. While the Basel III Endgame predates the 2023
large bank failures, regulators have pointed to the failures—all three failed banks had over $100
billion in assets—as a rationale for applying most elements of the rule to banks with over $100
billion in assets.
Under the Fed’s 2019 EPR rule, only Category I and II banks, and any other bank that voluntarily
opts in, are subject to advanced approaches. The 2023 proposal would replace advanced
approaches with a new expanded risk-based approach and extend those requirements to Category
III and IV banks and other banking organizations that are not subject to EPR. The proposed rule
applies to BHCs, IDIs (which include commercial banks and savings associations), savings and
loan holding companies that are not substantially engaged in insurance, and foreign banking
organizations with over $100 billion in assets. As of the date of the proposal, the total number of
affected institutions are 25 U.S. BHCs, 12 IHCs of foreign banks, and 62 IDIs (including IDIs of
holding companies with over $100 billion in assets).123
In the United States, advanced approaches banks calculate their requirement in two general ways:
a standardized approach applicable to all banks and a specialized “advanced approach” that
allows the banks to model many of their own risks. Although internal models can potentially be
gamed (i.e., designed to allow the bank to hold less capital rather than accurately measure risk),
they can also potentially model risk more sophisticatedly and be more tailored to a bank’s unique
risk profile. Following the Basel III Endgame, the proposed rule would reduce the use of internal
models through a new second standardized approach called the expanded risk-based approach.
Other banks with over $100 billion in assets would be required to calculate RWA under two
approaches for the first time. Industry has criticized this dual approach to capital requirements as
unduly burdensome.124
According to the proposal, its purpose is to improve the consistency of capital requirements
across banks, better match capital requirements to risk, and reduce their complexity (for Category

121 Vice Chair for Supervision Michael S. Barr, “Holistic Capital Review,” speech at the Bipartisan Policy Center, July
10, 2023, https://www.federalreserve.gov/newsevents/speech/barr20230710a.htm.
122 The proposal was published in the Federal Register on September 18, 2023. OCC, Federal Reserve, and FDIC,
“Regulatory Capital Rule: Amendments Applicable to Large Banking Organizations and to Banking Organizations
with Significant Trading Activity,” 88 Federal Register 64028, September 18, 2023, https://www.govinfo.gov/content/
pkg/FR-2023-09-18/pdf/2023-19200.pdf.
123 A current list of large depository holding companies is available at https://www.ffiec.gov/npw/Institution/
TopHoldings. A current list of large commercial banks is available at https://www.federalreserve.gov/releases/lbr/
current/default.htm.
124 Securities Industry and Financial Markets Association, “Understanding the Proposed Changes to the US Capital
Framework,” August 28, 2023, https://www.sifma.org/resources/news/understanding-the-proposed-changes-to-the-us-
capital-framework/.
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I and II banks—for other banks with over $100 billion in assets, complexity would be increased,
as they would face a new set of requirements). Despite the goal of reducing complexity, both the
internal models and their proposed replacements are highly complex and technical.
The regulators state that they expect the benefits of the proposal to outweigh the risks, because
“better alignment between capital requirements and risk-taking helps to ensure that banks
internalize the risk of their operations.” Concerns about how specific changes to risk weights
affect specific asset classes have also been raised, along with a few other criticisms. First, critics
claim that the proposal (and existing requirements) has “gold plated” Basel provisions, such as
risk weighting for residential mortgages, making them more stringent than the Basel Committee
agreements. Second, critics argue that the proposal is largely not tailored to reflect differences in
risk and complexity among large banks. Although P.L. 115-174 requires that EPR requirements
made under that section to be tailored, the Endgame proposal is generally the same for all banks
over $100 billion in assets.125 Third, critics claim that regulators have not provided the public
with enough information on the basis for the specific details of the requirements.
Finally, the proposal has been criticized because, according to the regulators, required capital
levels would increase “modestly” for lending activities and “substantially” for trading
requirements. Although the rule would not increase the required capital ratios, it would increase
the amount of capital that banks would have to hold because it would increase their RWA (i.e., the
denominator of risk-weighted ratios). The regulators estimate that the proposal’s effect on RWA
would increase the average amount of Common Equity Tier 1 (CET1) capital that large banks are
required to hold by 16% (19% for Category I and II banks, 6% for Category III and IV domestic
banks, and 14% for IHCs).126 (Similarly, the increase in RWA would increase TLAC
requirements.) If the regulators had wanted to have a neutral effect on overall capital
requirements, they could have reduced the ratios that banks faced to offset the increase in RWA.
For more information, see CRS Report R47855, Bank Capital Requirements: Basel III Endgame,
by Marc Labonte and Andrew P. Scott.
Extending Coverage of SLR and CCYB
Under the Endgame proposal, Category IV banks would become subject to the CCYB and the
SLR. Currently, Category I-III banks are subject to the CCYB. Category II and III banks must
meet a 3% SLR, and Category I banks must meet a higher SLR. The regulators stated that this
will “bring further alignment” of large bank capital requirements and strengthen large bank
resiliency. The proposal does not address the fact that the CCYB has never been used since
inception nor whether many Category IV banks have significant off-balance-sheet exposures that
would make the SLR relevant.
AOCI and Unrealized Capital Losses
As part of the Basel III Endgame proposal, all banks with over $100 billion in assets would have
to include most parts of AOCI in CET1 capital. This change would align capital rules with the
treatment of AOCI under generally accepted accounting principles. One component of AOCI to
be included is unrealized capital gains and losses on AFS debt securities (e.g., corporate and

125 In addition, the proposal’s market risk provisions would apply to banks with $100 billion or more in total assets and
banks with $5 billion or more of trading assets plus trading liabilities (increased from $1 billion or more under current
regulation) or trading liabilities equal to 10% or more of total assets (unchanged from current regulation).
126 The regulators included only Category I-IV banking organizations in this analysis, as not all entities are subject to
parts of the rule.
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government bonds).127 Doing so would have the effect of increasing a bank’s capital levels when
it had unrealized capital gains and reducing them when it had losses.
Changes to AOCI have been proposed before.128 In 2012, the original Basel III proposal would
have applied this requirement to all banks (and BHCs). The regulators argued that “unrealized
losses could materially affect a banking organization’s capital position … and associated risks
should therefore be reflected in its capital ratios.”129
Facing criticism from banks that this treatment would cause capital levels to be too volatile, the
version of the rule finalized in 2013 applied the requirement only to advanced approaches
banks—at the time, banks with at least $250 billion in assets or $10 billion in on-balance-sheet
foreign exposure. All other banks could permanently opt out of this requirement. Doing so is
sometimes referred to as the “AOCI filter.”130 In its 2019 regulation implementing P.L. 115-174,
the Fed reduced the number of banks required to follow advanced approaches (and hence the
AOCI requirement) to Category I and II banks.131
The 2023 proposal would extend the AOCI requirement to any U.S. bank, BHC, or IHC with over
$100 billion in assets. As with earlier reforms, the treatment of trading and held-to-maturity
(HTM) securities would not change. The regulators estimate that the inclusion of AOCI in capital
for large banks would increase average capital in the long run based on 2015 to 2022 data, as
summarized in Table 2. In any given year, the effect would be larger if banks have unrealized
losses and smaller if banks have unrealized gains.
Table 2. Estimated Impact of Proposed AOCI Inclusion on Capital
Long-Run Average Increase

CET1 RW
Leverage
Category III domestic
4.6%
3.8%
Category III IHC
13.2%
9.7%
Category IV
2.6%
2.5%
Source: OCC, Federal Reserve, and FDIC, Regulatory Capital Rule: Amendments Applicable To Large Banking
Organizations And To Banking Organizations With Significant Trading Activity, https://www.govinfo.gov/content/pkg/
FR-2023-09-18/pdf/2023-19200.pdf.
As seen in Figure 4, recognizing unrealized gains and losses would lead to higher capital in some
years and lower in others for banks overall, but unrealized losses have increased rapidly
beginning in 2022, equaling $232 billion on AFS securities and $284 billion on HTM securities in
the first quarter of 2023. This compares to $4 billion in realized losses in the first quarter.

127 Banks classify the debt securities they invest in as either trading, AFS, or held to maturity depending on how likely
the bank is to sell a security over a particular time frame. For AFS, a bank does not have current plans to sell but
recognizes a possibility of selling before the security matures.
128 Basel Committee on Bank Supervision, Basel III: Finalising Post-Crisis Reforms, December 2017,
https://www.bis.org/bcbs/publ/d424.pdf.
129 Federal Reserve, “Federal Reserve Board Invites Comment on Three Proposed Rules Intended to Help Ensure
Banks Maintain Strong Capital Positions,” press release, June 7, 2012, https://www.federalreserve.gov/newsevents/
pressreleases/bcreg20120607a.htm.
130 OCC and Federal Reserve, “Regulatory Capital Rules,” 78 Federal Register 62018, October 11, 2013,
https://www.gpo.gov/fdsys/pkg/FR-2013-10-11/pdf/2013-21653.pdf.
131 Federal Reserve, “Federal Reserve Board Finalizes Rules That Tailor Its Regulations for Domestic and Foreign
Banks to More Closely Match Their Risk Profiles.”
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The proposal only partially addresses the current problem for two reasons. First, it does not apply
to unrealized losses on HTM securities (the rationale being the bank does not intend to sell those
securities), which account for over half of banks’ unrealized losses. Second, it does not apply to
banks with less than $100 billion in assets, whereas banks of all sizes have experienced
unrealized losses. According to the FDIC, community banks had unrealized losses of $59.2
billion in the first quarter of 2023, and their securities holdings (22% of total assets) are
comparable to other banks (24%).132
Figure 4. Unrealized Gains and Losses on Securities Held by FDIC-Insured
Depository Institutions
2008:Q1-2023:Q1

Source: FDIC.
Losses on securities played a major role in SVB’s failure, as discussed above. At the end of 2022,
SVB had $1.9 billion in unrealized AFS losses that would have been recognized as capital under
AOCI, although most of SVB’s securities were classified as HTM and so would not have been
affected by the proposal.133 SVB had over $100 billion in assets and would have been subject to
this proposal.134 The Fed also reports that SVB would have had to start complying with the AOCI
requirement in 2021 as an advanced approach bank had the 2019 tailoring rule not limited the
AOCI requirement to Category I and II banks.135

132 See FDIC Quarterly, vol. 17, no. 2, p. 22, https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2023mar/
qbp.pdf#page=22. For more information, see CRS Insight IN12231, Banks’ Unrealized Losses, Part 1: New Treatment
in the “Basel III Endgame” Proposal, by Marc Labonte.
133 To a lesser extent, unrealized losses on securities also played a role in the failures of Signature and First Republic.
See FDIC, FDIC’s Supervision of Signature Bank, April 28, 2023, p. 16, https://www.fdic.gov/news/press-releases/
2023/pr23033a.pdf; and Rachel Louise Ensign and Ben Eisen, “First Republic Bank Is Seized, Sold to JPMorgan in
Second-Largest U.S. Bank Failure,” Wall Street Journal, May 1, 2023, https://www.wsj.com/articles/first-republic-
bank-is-seized-sold-to-jpmorgan-in-second-largest-u-s-bank-failure-5cec723.
134 For more information, see CRS Insight IN12232, Banks’ Unrealized Losses, Part 2: Comparing to SVB, by Marc
Labonte.
135 Federal Reserve, Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.
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G-SIB Surcharge Proposal
The Fed issued a proposed rulemaking in July 2023 that would revise the calculation of the
capital surcharge for G-SIBs (Category I banks).136 The proposal would take effect two calendar
quarters after the rule is finalized. A bank’s G-SIB surcharge is levied in increments of 0.5
percentage points based on the output of a numerical formula based on its size,
interconnectedness, substitutability, complexity, and cross-jurisdictional activity.
The Fed’s proposed rule would change the surcharge formula in several ways.137 First, it would
(depending on the factor) use average daily or month-end data over the course of the year instead
of the current practice of using year-end values, which provides banks the incentive for balance
sheet “window dressing” on that date to lower their surcharges. Second, the proposal would
change the surcharge from increments of 0.5 percentage points to 0.1 to reduce “cliff effects,”
where banks tend to cluster just beneath scores that would increase their surcharges by 0.5
percentage points. Third, the Fed is seeking comment on whether the surcharge should be updated
more quickly when the formula yields a different score. Currently, the updated surcharge is
applied on January 1, one full year after the formula calls for an increased surcharge. Fourth, the
proposal would clarify that if a bank’s score rises and then falls before the higher surcharge is
implemented, the subsequent lower score would supersede it. Fifth, the proposal would modify
how various inputs into the score are measured, including by adding derivative exposures to the
measure of cross-jurisdictional activity. Sixth, the proposal would subject foreign banks to the
same reporting as domestic banks, whereas currently foreign banks have streamlined reporting
requirements.
The Fed expects the proposal to “modestly increase the … capital surcharges of GSIBs, with
minimal effect on their cost of capital and real economic activity.” It estimates that the average
surcharge would increase by 0.13 percentage points and required capital would increase by $13
billion. The Fed believes the benefits of the proposal—increased financial stability via better
alignment of G-SIB surcharges with the systemic risk posed by the G-SIB—would outweigh the
costs. The Fed also estimates that one G-SIB would face a higher TLAC requirement because of
the change in its G-SIB score.
Some of the metrics used to calculate the G-SIB surcharge are also used to classify banks into
other EPR categories. Because of the proposed change to the definition of cross-jurisdictional
activity, the Fed estimates that seven domestic banks and two IHCs that are currently Category III
or IV banks would become Category II banks subject to more stringent regulatory requirements.
Any bank with over $100 billion in total assets and $75 billion in cross-jurisdictional activity is
automatically designated as a Category II bank.
Long-Term Debt Proposal
In August 2023, the banking regulators issued a joint proposed rule to subject all banks with $100
billion or more in assets to LTD requirements and clean holding company requirements
comparable to those that G-SIBs face under TLAC.138 For example, eligible long-term debt would

136 The proposal was published in the Federal Register in September 2023. Federal Reserve, “Regulatory Capital Rule:
Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies; Systemic Risk Report
(FR Y-15),” 88 Federal Register 60385, September 1, 2023, https://www.govinfo.gov/content/pkg/FR-2023-09-01/pdf/
2023-16896.pdf.
137 The Basel III Endgame proposal also notes that some of its changes would affect a bank’s G-SIB score.
138 OCC, Federal Reserve, and FDIC, “Long-Term Debt Requirements for Large Bank Holding Companies, Certain
(continued...)
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be unsecured, not guaranteed or enhanced, and have “plain vanilla” features. As discussed above,
LTD requirements are meant to make it easier to “bail in” a failing bank by converting bonds
issued by the bank to equity, reducing the chance that it will be “bailed out” by the government.
Clean holding company requirements limit the types of liabilities and financial contracts that a
holding company can hold or enter into, respectively, in order to ensure that it can be wound
down easily if it failed.
If a bank is not too big to fail or could be easily resolved through the FDIC’s traditional resolution
process, LTD requirements are of limited utility in facilitating resolution. The regulators argue
that these reforms are needed because the failure of a bank with over $100 billion in assets is
more likely to pose systemic risk and impose losses on the FDIC’s Deposit Insurance Fund.
Although Category III and IV banks are not as complex or systemically important as G-SIBs are,
several Category III and IV banks (popularly called “regional banks”) have grown significantly
through mergers and organic growth in recent years, increasing their systemic importance. The
FDIC used its systemic risk exception to least cost resolution to restore financial stability in the
resolution of SVB and Signature—both of which had over $100 billion in assets—in the spring of
2023.
Large banks would be required to hold LTD equal to the greater of 6% of RWA, 3.5% of total
assets, and 2.5% of total leverage exposure (for banks subject to the SLR), and holding
companies would be banned from issuing external short-term debt. The proposal would also
extend LTD requirements to IDIs with over $100 billion in assets unless they are G-SIB
subsidiaries. For these IDIs, the purpose of LTD would be to facilitate FDIC resolutions, as
opposed to the single point of entry in bankruptcy or OLA for BHCs that TLAC was originally
intended to facilitate. To avoid interconnectedness, capital requirements would discourage banks
from holding LTD issued by other banks.
Under the proposal, the requirements would be phased in over three years. The regulators
estimate that banks would need to issue $70 billion in new LTD (equivalent to 27% of the
requirement) to meet the requirement and could reduce large banks’ net interest margins by
between 0.05 and 0.1 percentage points.139 The proposal is tailored in the sense that it is less
stringent than current TLAC requirements for G-SIBs but places largely the same requirements
on all banks with over $100 billion in assets that are not G-SIBs.
Regulators argue that the proposal would facilitate orderly resolutions and reduce the cost of bank
failures to the FDIC’s Deposit Insurance Fund, notably because the LTD requirement would
apply to both BHCs and IDIs (whereas existing requirements apply only at the holding company
level). Regulators argue that LTD would reduce the risk of runs by providing for a more stable
source of funding. Higher capital requirements would arguably better accomplish both of these
goals, albeit at a higher price to the banks. Typically, capital—not debt requirements—is the basis
of safety and soundness regulation because only capital can be written down in the event of
losses. In this case, the regulators are focused on the potential benefits that LTD would provide
after an institution has failed:
Expanding the FDIC’s range of options for resolving a failed IDI to potentially include the
use of a bridge depository institution that can assume all deposits on a least-cost basis can

Intermediate Holding Companies of Foreign Banking Organizations, and Large Insured Depository Institutions,” 88
Federal Register 64524, September 19, 2023, https://www.govinfo.gov/content/pkg/FR-2023-09-19/pdf/2023-
19265.pdf. The proposal also makes technical changes to the TLAC rule. For a comparison, see Davis Polk,
“Comparison of the Long-Term Debt Proposal to the Existing TLAC Rule,” September 5, 2023,
https://www.davispolk.com/sites/default/files/2023-09/comparison-of-LTD-proposal-and-TLAC-rule.pdf.
139 These estimates are independent of the Basel Endgame proposal, which would further increase LTD requirements
by increasing RWA.
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significantly improve the prospect of an orderly resolution. When an IDI fails quickly, a
bridge depository institution might afford the FDIC additional time to find an acquirer for
the IDI’s assets and deposits. Transfer of deposits and assets to a bridge depository
institution may also give the FDIC additional time to execute a variety of resolution
strategies, such as selling the IDI in pieces over time or effectuating a spin-off of all or
parts of the IDI’s operations or business lines. LTD can therefore reduce costs to the DIF
and expand the available resolution options if a bank fails…. The availability of LTD
resources would also potentially support resolution strategies that involve a recapitalized
bridge depository institution exiting from resolution on an independent basis as a newly-
chartered IDI that would have new ownership.140
Acting Comptroller Michael Hsu suggested that by increasing resolution options, requirements
like this proposal could avoid a situation where a failing regional bank would have to be bought
by “one of the four megabanks.”141 For example, JPMorgan Chase purchased First Republic’s
assets and deposits when the FDIC took First Republic into receivership in the spring of 2023.
Some argue that problems with resolving large banks stem from agency risk aversion rather than
a lack of tools. The FDIC, according to this perspective, could have resolved Signature and SVB
at least cost to the taxpayer in multiple ways had it been willing to impose losses on uninsured
depositors, but it did not want to risk causing financial instability. (And if it was correct in this
assessment, then the choice not to impose losses on uninsured depositors could be characterized
as a choice based on assessment of these factors rather than risk aversion. The resolution did
expose debtholders to potential losses.) If the problem is risk aversion, LTD requirements might
not make a difference—the FDIC might still decide that imposing losses on LTD holders of a
large bank would lead to financial instability, or it might still be unwilling to impose losses on
uninsured depositors in the presence of LTD requirements. The FDIC declined to use OLA to
resolve SVB, even though the proposal is intended to facilitate OLA.142
FDIC’s Resolution Proposal
As noted above, the FDIC requires IDIs with over $50 billion in assets to file resolution plans—
unlike the Fed, which eliminated resolution planning requirements for banks that are not Category
I-III banks pursuant to P.L. 115-174. However, the FDIC has imposed a moratorium on new
submissions for banks with less than $100 billion in assets since 2018.143 In 2021, the FDIC
reduced the frequency of IDI resolution plans for banks with more than $100 billion in assets
from annual to triennial. In 2023, the FDIC proposed a rule to revise its resolution planning
requirements for IDIs.144 (It is not a joint rule with the Fed, and the Fed’s requirements for BHCs
and foreign banks are not affected by this proposal.)

140 OCC, Federal Reserve, and FDIC, “Long-Term Debt Requirements for Large Bank Holding Companies, Certain
Intermediate Holding Companies of Foreign Banking Organizations, and Large Insured Depository Institutions.”
141 Acting Comptroller of the Currency Michael J. Hsu, “Bank Mergers and Industry Resiliency,” speech, May 9, 2022,
https://www.occ.gov/news-issuances/speeches/2022/pub-speech-2022-49.pdf.
142 It would be speculative to guess whether the FDIC might have used OLA to resolve SVB if the proposed rule had
been in place at the time of its failure.
143 The 2018 moratorium was for all banks with over $50 billion in assets and was imposed pending the finalization of
new guidance. In 2021, the FDIC lifted the moratorium for banks with over $100 billion in assets. See FDIC, “FDIC
Announces Lifting IDI Plan Moratorium,” January 19, 2021 https://www.fdic.gov/resources/resolutions/resolution-
authority/idi-statement-01-19-2021.pdf.
144 FDIC, “Resolution Plans Required for Insured Depository Institutions with $100 Billion or More in Total Assets;
Informational Filings Required for Insured Depository Institutions with at Least $50 Billion but Less Than $100 Billion
in Total Assets,” 88 Federal Register 64579, September 19, 2023, https://www.govinfo.gov/content/pkg/FR-2023-09-
19/pdf/2023-19266.pdf.
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The proposal would create two sets of resolution planning requirements—a tailored set for IDIs
with $50 billion to $100 billion in assets (which the FDIC refers to as an “informational filing”
rather than a resolution plan) and a set for IDIs with over $100 billion in assets. If finalized, it
would end the moratorium on resolution planning for banks with between $50 billion and $100
billion in assets. It would modify the frequency of submissions to every other year with an
information submission required in off years—less frequent than the original rule but more
frequent than the triennial cycle in place since 2021. The proposal would also add an explicit
enforcement mechanism for failure to submit a credible plan.
The FDIC states that the proposal would formalize much of the agency feedback that has been
given to banks in previous years.145 The FDIC describes the proposal as incorporating lessons
learned from previous rounds of resolution planning and resolution problems raised in the 2023
bank failures and providing tailoring for smaller institutions. According to FDIC Chairman
Gruenberg, the inability to use the standard “over the weekend” purchase and assumption method
to resolve large banks in 2023 means that the FDIC needs more information from banks on
alternatives in resolution plans.146
In his vote against the proposal, FDIC Director Jonathan McKernan questioned whether the FDIC
had sufficient statutory authority to make all of the proposed changes.147 As noted above, the
proposal is not pursuant to the Dodd-Frank Act’s resolution plan authority—the FDIC is relying
on broader authority for its resolution planning requirements. In his vote against the proposal,
FDIC Vice Chair Travis Hill points out that, according to the FDIC’s estimates, the informational
filings for smaller institutions under the proposal would require more hours of regulatory
compliance than for larger banks’ resolution plans under current practices. He also criticized the
increased frequency of filing requirements (relative to practices since 2021) given the FDIC was
previously unable to give banks timely feedback on their plans.148
Conclusion
From 2010 until 2023, no large bank experienced safety and soundness difficulties, suggesting
that EPR was either successful or untested. That changed with the large bank failures of 2023.
Those failures have led to the first major re-evaluation of the EPR regime among policymakers
since P.L. 115-174 was enacted in 2018.
Banking inherently involves risk, and a system with a zero probability of failure is arguably both
impossible and undesirable. Nevertheless, the incipient run on the broader banking system and
use of emergency assistance by regulators to prevent it when SVB and Signature failed—
although those banks were not perceived as being particularly systemically important—points to
the outsized economic costs imposed by large bank failures.
EPR is relatively narrow in scope, limited to a few provisions that addressed key problems that
arose in the financial crisis. The problems that arose in 2023 arguably did not match well to those
provisions. Congress and the regulators could consider whether EPR should be expanded to

145 For a summary of the proposal, see Davis Polk, “FDIC’s Proposed Revamp of the IDI Resolution Planning Rule,”
September 5, 2023, https://www.davispolk.com/sites/default/files/2023-09/IDI-resolution-planning-rule-deck.pdf.
146 FDIC Chairman Martin J. Gruenberg, “Statement on Notice of Proposed Rulemaking on Resolution Plans for
Insured Depository Institutions,” August 29, 2023, https://www.fdic.gov/news/speeches/2023/spaug2923b.html.
147 FDIC Director Jonathan McKernan, “Statement on the Proposed Resolution Submission Requirements for Certain
Insured Depository Institutions,” August 29, 2023, https://www.fdic.gov/news/speeches/2023/spaug2923f.html.
148 FDIC Vice Chair Travis Hill, “Statement on the Proposed Amendments to the IDI Resolution Planning Rule,”
August 29, 2023, https://www.fdic.gov/news/speeches/2023/spaug2923k.html.
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address a broader array of prudential issues. Alternatively, the 2023 failures could be viewed as
demonstrating that EPR offers a false sense of security and that regulation is unlikely to
effectively contain systemic risk.
Appropriately tailoring regulation to risk has been a focus of policy debate since Dodd-Frank was
enacted given the significant differences in size, complexity, and business between, say, Category
I and Category IV banks. The 2023 failures raise the issue of whether the rollback in requirements
following the enactment of P.L. 115-174 means that appropriate EPR requirements are no longer
well aligned with banks that pose systemic risk. To date, regulatory initiatives have focused on
applying new proposals and some existing provisions to more banks, in most cases those with
over $100 billion in assets. As two of the three banks that failed in 2023 were not BHCs and were
therefore not subject to EPR, Congress and the regulators might consider whether exempting
banks without holding companies from EPR still achieves policy goals.
The 2023 failures demonstrate that bank failures do not follow a predictable script, meaning
supervisors need to be nimble and responsive to stave off problems. EPR is a regulatory approach
to addressing TBTF, but the 2023 failures again raised the question of whether large banks are
“too big to regulate” effectively. If supervision is ineffective, then regulatory requirements are
unlikely to be effective. Congress and the regulators may also consider whether supervisory
reforms are needed to ensure that large banks are subject to effective supervision. To date,
Congress has deferred to regulators on structuring and managing large bank supervision.

Author Information

Marc Labonte

Specialist in Macroeconomic Policy

Acknowledgments
This report uses material that has appeared in other CRS reports, including with co-authors. The author
would like to thank Graham Tufts, research assistant, for research assistance.

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