Large, systemically important banks in the U.S. will have to hold additional capital, or shrink their businesses, under new rules approved Monday by the U.S. Federal Reserve Board.

The final rule approved by the Fed establishes the criteria for identifying systemically important banks, and the methodology for calculating their risk-based capital surcharges.

Under the rule, eight U.S. firms are expected to be considered systemically important, and they are expected to hold between 1.0% and 4.5% of total risk-weighted assets as added capital buffers. The eight firms are: Bank of America Corp.; The Bank of New York Mellon Corp.; Citigroup, Inc.; Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Co.

“A key purpose of the capital surcharge is to require the firms themselves to bear the costs that their failure would impose on others,” says Janet Yellen, Fed chairwoman, in a statement. “In practice, this final rule will confront these firms with a choice: they must either hold substantially more capital, reducing the likelihood that they will fail, or else they must shrink their systemic footprint, reducing the harm that their failure would do to our financial system. Either outcome would enhance financial stability.”

The final rule requires the big banks to calculate their surcharges under two different methods: one based on the framework agreed to by the Basel Committee on Banking Supervision that factors in a bank’s size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity; and, a second method that uses similar inputs, but is calibrated to result in significantly higher surcharges, and factors in a firm’s reliance on short-term wholesale funding. Banks are required to use the higher of the two calculations in actually establishing their surcharges.

“A set of graduated capital surcharges for the nation’s most systemically important financial institutions will be an especially important part of the strengthened regulatory framework we have constructed since the financial crisis,” says Daniel Tarullo, Fed governor, “Like the higher leverage ratio requirements we will apply to these firms, they reflect the relatively new, but very significant, principle that the stringency of prudential standards should vary with the systemic importance of regulated firms.”

The surcharges will start to be phased in on Jan. 1, 2016, becoming fully effective on Jan. 1, 2019.