Federal Reserve Board, FDIC and OCC finalize leverage capital standard changes including a 1 percent cap on the enhanced supplementary leverage ratio add-on for depository institution subsidiaries

The Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency jointly issued a final rule modifying certain regulatory capital standards to reduce disincentives for large banking organizations to engage in lower-risk activities, including intermediating in U.S. Treasury markets. The rule is substantially similar to the June proposal, with changes focused on the depository institution level. The final rule adjusts leverage capital standards for the largest and most systemically important banking organizations so the leverage requirement functions as a backstop to risk-based capital requirements and is calibrated based on each organization’s overall systemic risk. For depository institution subsidiaries, the enhanced supplementary leverage ratio component is capped at one percent, limiting the overall requirement for those institutions to no more than four percent; the agencies cite differences between the systemic risk and capital requirements of the consolidated organization and its depository subsidiaries and the need for the leverage measure to operate as a backstop, particularly during stress. The agencies estimate overall capital levels will remain broadly unchanged, with aggregate Tier 1 capital requirements for affected bank holding companies reduced by less than two percent, and include conforming changes to other rules linked to leverage standards such as total loss-absorbing capacity and long-term debt requirements. The final rule takes effect on April 1, 2026, with optional early adoption of the modified standards from January 1, 2026.