In keeping with the intent of EGRRCPA, the Fed adopted a revised tailoring framework for the application of our enhanced standards to large firms. That framework rightly differentiates standards, including capital and liquidity requirements, based on the risk profile of an individual firm. Our previous framework relied heavily on a firm’s total assets to determine the stringency of our regulatory requirements.
However, the tailoring framework relies on a broader array of indicators—size, as well as measures of short-term wholesale funding, non-bank assets, off-balance sheet exposures, cross-jurisdictional activity—to better align our prudential standards with the risk of a firm. Under the tailoring framework, the most complex, systemically important firms are subject to the most stringent requirements, while less complex firms are subject to commensurately reduced requirements.