April 11, 2018

FED and OCC proposed a rule that would further tailor leverage ratio requirements to the business activities and risk profiles of the largest domestic firms. Firms that are required to comply with the enhanced supplementary leverage ratio (eSLR) are subject to a fixed leverage standard, regardless of their systemic footprint. The proposal would instead tie the standard to the risk-based capital surcharge of a firm, which is based on the individual characteristics of the firm. The resulting leverage standard would be more closely tailored to each firm. Comments on the rule will be accepted for 30 days after publication in the Federal Register.

The proposed changes seek to retain a meaningful calibration of the eSLR standards while not discouraging firms from participating in low-risk activities. The changes also correspond to recent changes proposed by BCBS. Taking into account supervisory stress testing and the existing capital requirements, the agency staff estimate that the proposed changes would reduce the required amount of tier 1 capital for the holding companies of these firms by approximately USD 400 million, or approximately 0.04% in aggregate tier 1 capital. eSLR standards apply to all U.S. holding companies identified as global systemically important banking organizations (G-SIBs), along with the insured depository institution subsidiaries of these firms.

In the United States, G-SIBs must maintain a supplementary leverage ratio of more than 5%, which is the sum of the minimum 3% requirement plus a buffer of 2%, to avoid limitations on capital distributions and certain discretionary bonus payments. The insured depository institution subsidiaries of G-SIBs must maintain a supplementary leverage ratio of 6% to be considered "well capitalized" under the agencies' prompt corrective action framework. At the holding company level, the proposed rule would modify the fixed 2% buffer to be set to one half of each firm's risk-based capital surcharge. For example, if a G-SIB's risk-based capital surcharge is 2%, it would now be required to maintain a supplementary leverage ratio of more than 4%, which is the sum of the unchanged minimum 3% requirement plus a modified buffer of 1%. The proposal would similarly tailor the current 6% requirement for the insured depository institution subsidiaries of G-SIBs that are regulated by FED and OCC.

 

Related Links

Comment Due Date: Federal Register + 30 days

Keywords: Americas, US, Banking, Leverage Ratio, eSLR, G-SIB, Risk-based Capital Surcharge, TLAC, OCC, FED

Related Articles
News

US Agencies Consult on Capital Treatment of Land Development Loans

US Agencies (FDIC, FED, and OCC) issued a proposed rule on the treatment of loans that finance the development of land for purposes of the one- to four-family residential properties exclusion in the definition of high volatility commercial real estate (HVCRE) exposure in the regulatory capital rule.

July 12, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Second Update for July 2019

Under the Single Rulebook question and answer (Q&A) updates for this week, EBA published answers to five questions related to supervisory reporting.

July 12, 2019 WebPage Regulatory News
News

ESMA Updates Manual for European Single Electronic Format in EU

ESMA updated the reporting manual for European Single Electronic Format (ESEF).

July 12, 2019 WebPage Regulatory News
News

FED Updates Supplemental Instructions for Reporting Form FR Y-9C

FED updated the supplemental instructions for FR Y-9C reporting.

July 12, 2019 WebPage Regulatory News
News

EBA Publishes Report on Monitoring Implementation of LCR in EU

EBA published its first report on the monitoring of the implementation of liquidity coverage ratio (LCR) in EU.

July 12, 2019 WebPage Regulatory News
News

APRA Applies Additional Capital Requirements to Three Australian Banks

APRA is applying additional capital requirements to three major banks in Australia to reflect higher operational risk identified in their risk governance self-assessments.

July 11, 2019 WebPage Regulatory News
News

IMF Report on 2019 Article IV Consultation on Euro Area Policies

IMF published its staff report in context of the 2019 Article IV consultation on euro area policies with member countries.

July 11, 2019 WebPage Regulatory News
News

FSB to Survey Practices on Cyber Incident Response and Recovery

FSB launched a survey on the industry practices on cyber incident response and recovery.

July 11, 2019 WebPage Regulatory News
News

ECB Appoints New Members of Supervisory Board

The Governing Council of ECB appointed Edouard Fernandez-Bollo, Kerstin af Jochnick, and Elizabeth McCaul as representatives to the Supervisory Board of ECB Banking Supervision, for a five-year non-renewable term.

July 11, 2019 WebPage Regulatory News
News

OSFI Consults on Applying Proportionality to Pillar 1 Rules in Canada

OSFI published a discussion paper seeks input on possible tailoring of the capital and liquidity requirements for small and medium-size deposit-taking institutions.

July 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3435