Systemic risk: Fed methodology out of sync with Basel’s

Different inputs and calculator formulae pose dual test to US banks

The two methodologies used to gauge US banks’ systemic threat differ substantially with each other, complicating dealers’ ability to shrink their systemic footprint and lower applicable capital surcharges, Risk Quantum analysis shows.

US banks are subject to two methods of measuring their systemic riskiness. Method 1, based on the Basel Committee framework, comprises 12 indicators spread across five broad categories: size; interconnectedness; complexity; cross-jurisdictional activity; and

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