As in the G-SIBs framework, D-SIBs will be required to hold additional Common Equity Tier 1 Capital (CET1) to meet their HLA requirements, which eventually support capital conservation of the Basel III capital framework. It is a positive development that national regulators are given the authority to decide on the appropriate level of additional CET1, consistent with each bank’s systemic importance.
One fundamental point, however, is that ongoing changes in technology are improving the terms of these tradeoffs, sometimes in several dimensions at the same time. For example, traditional constraints on the timing and location of economic transactions are being relaxed simultaneously and rapidly in a number of markets, leading to large potential gains in convenience.