The recent financial crisis has triggered a rethinking of the supervision and regulation of systemic connectedness. While there is a clear need to take a multipronged approach to systemic risk, and a flood of regulatory reform proposals has ensued, there is considerable uncertainty about how those proposals can be practically applied. Thus, this chapter aims to contribute to the debate on systemic-risk-based regulation in two ways. First, it presents a methodology to compute and smooth a systemic-risk-based capital surcharge. Second, it formally examines whether a mandate, by itself, to explicitly oversee systemic risk, as envisioned in some recent proposals, is likely to be successful in mitigating it. Systemic-risk-Based Surcharges While not necessarily endorsing the adoption of systemic-based capital surcharges, the first part of the chapter presents a methodology to calculate such surcharges. Underpinning this methodology is the notion that these surcharges should be commensurate with the large negative effects that a financial firm’s distress may have on other financial firms—their systemic interconnectedness. The chapter presents two approaches to implement this methodology:• A standardized approach under which regulators assign systemic risk ratings to each institution and then assess a capital surcharge based on this rating.• A risk-budgeting approach, which borrows from the risk management literature and determines capital surcharges in relation to an institution’s additional contribution to systemic risk and its own probability of distress.