Proposed rules that would revise the supplementary leverage ratio for certain banks by excluding some of their central bank deposits for custody, safekeeping and asset servicing activities are set to be published in the Federal Register Tuesday, opening a 60-day comment period.
The joint notice of proposed rulemaking, issued by the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC), implements a portion of last year’s regulatory relief legislation (the Economic Growth, Regulatory Relief, and Consumer Protection Act, EGRRCPA, S.2155), which directed the federal banking agencies to exclude funds deposited with certain central banks from the supplementary leverage ratio calculation for custodial banking organizations.
Regulators – including FDIC Chairman Jelena McWilliams – have termed the accounts “especially low risk” and note they tend to increase during times of market stress.
The impact of the proposal is limited to a small handful of institutions, according to information included in the agencies’ joint release about the proposal earlier this month. In that release, the regulators said that based on data available at the time of the proposal, only The Bank of New York Mellon Corporation, Northern Trust Corporation, and State Street Corporation, together with their depository institution subsidiaries, would be considered predominantly engaged in custody, safekeeping, and asset servicing activities and therefore able to exclude deposits at central banks from their supplementary leverage ratio.
Reg lookup: Regulatory Capital Rule: Revisions to the Supplementary Leverage Ratio to Exclude Certain Central Bank Deposits of Banking Organizations Predominantly Engaged in Custody, Safekeeping and Asset Servicing Activities