The Board of Governors of the Federal Reserve System (“FRB”), the FDIC and the Office of the Comptroller of the Currency (“OCC”) adopted a final rule to strengthen the leverage ratio standards for U.S. top-tier bank holding companies with more than $700 billion in consolidated total assets, or more than $10 trillion in assets under custody (“covered BHCs”), and their insured depository institution (“IDI”) subsidiaries.
Covered BHCs must maintain a leverage buffer greater than two percentage points above the minimum supplementary leverage ratio requirement of three percent, for a total of more than five percent, to avoid restrictions on capital distributions and discretionary bonus payments. IDI subsidiaries of covered BHCs must maintain a supplementary leverage ratio of at least six percent to be considered “well capitalized” under the agencies’ prompt corrective action framework. The final rule currently applies to eight large U.S. banking organizations that meet the size thresholds and their IDI subsidiaries.
The final rule will be effective on January 1, 2018.
The FRB, FDIC and OCC also issued a notice of proposed rulemaking that would modify the denominator calculation for the supplementary leverage ratio in a manner consistent with recent changes agreed to by the Basel Committee on Banking Supervision. The revisions in the proposed rulemaking would apply to all internationally active banking organizations, including those subject to the enhanced supplementary leverage ratio final rule. Comments on the proposed rulemaking will be due by June 13, 2014.
See: FRB Press Release; FDIC Press Release; Final Regulatory Capital Rule; Proposed Revisions to Supplementary Leverage Ratio.
See also: Chair Yellen’s Statement; Governor Tarullo’s Statement.
Related news: FRB, FDIC and OCC Issue Notice of Proposed Rulemaking on the Supplementary Leverage Ratio for G-SIBs (July 10, 2013); SIFMA, ABA and FSR Submit Comments to U.S. Federal Regulators on Proposed Leverage Ratio Rule (October 23, 2013).