Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency seek comment on systemic risk based enhanced supplementary leverage ratio for US G-SIBs

The Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency have issued a proposal to modify certain regulatory capital standards, aiming to reduce leverage-based disincentives for banking organizations to undertake lower-risk activities and to support the smooth functioning of US Treasury markets. The package focuses on recalibrating leverage capital standards for the largest and most systemically important banking organizations so they operate as a backstop to risk-based requirements rather than becoming the binding constraint on low-risk exposures. Under the proposal, the enhanced supplementary leverage ratio (eSLR) for both US global systemically important bank holding companies and their depository institution subsidiaries would be set based on the firm’s overall systemic risk. The agencies expect overall capital levels to remain broadly unchanged, with aggregate tier 1 capital standards for affected bank holding companies reduced by less than 2% in total, while noting that some subsidiary depository institutions could see larger reductions that would generally not be available for distribution to external shareholders due to bank holding company-level restrictions. Conforming amendments would also be made to other frameworks linked to the eSLR, including total loss-absorbing capacity and long-term debt requirements. Comments are due by August 25, 2025.