The Board's rules do not allow such adjustments. Second, the industry's practices are divergent. The Roundtable surveyed many of its members and was itself surprised to learn that there is no common approach to addressing investment risk. The Board assumes that objections to the capital charge are of no practical significance because FHCs will remain well capitalized even after the capital charge. This assumption is not correct.
Institutions typically maintain a cushion above regulatory capital requirements.
Such a cushion protects against unexpected events and ensures high ratings, among other things. A mandatory increase in capital will not reduce the need for an institution to maintain such a cushion. Accordingly, the capital charge will have a real, concrete and significant impact on institutions. It will require institutions to raise additional capital for each equity investment. It will do so for no economic reason.