Notice of Proposed Rulemaking to strengthen leverage ratio standards

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation (collectively, the agencies) are seeking comment on a notice of proposed rulemaking (NPR) to strengthen the leverage ratio standards for the largest, most systemically significant U.S. banking organizations. The NPR was published in the Federal Register on Aug. 20, 2013, with a 60-day comment period.

In this NPR, the agencies propose to further increase the leverage capital requirements for the largest, most systemically significant U.S. banking organizations. The NPR applies to any bank holding company (BHC) with more than $700 billion in consolidated total assets or $10 trillion in assets under custody (covered BHC) and any insured depository institution subsidiary of these BHCs (covered IDI). Using these asset thresholds, the NPR currently would apply to the eight largest, most systemically significant U.S. banking organizations. The agencies propose to establish a "well-capitalized" threshold of 6 percent for the supplementary leverage ratio under the agencies' respective prompt corrective action regulations for any covered IDI. In addition, the agencies propose to establish a leverage buffer for covered BHCs, which would require them to maintain at least 2 percentage points above the minimum supplementary leverage ratio requirement of 3 percent, for a total of 5 percent. Failure to maintain this buffer would result in limitations on dividend distributions and discretionary bonus payments. The proposal, if adopted, will take effect on Jan. 1, 2018, concurrent with the 3-percent minimum supplementary leverage ratio requirement in the new capital rule.