A final rule easing leverage capital requirements for the largest and most systemically important banking organizations was announced Tuesday by federal regulators and is set to take effect April 1, 2026.
Institutions are free to adopt the changes as of Jan. 1, however, the agencies said.
The final rule was adopted jointly by the Federal Deposit Insurance Corp. (FDIC), Federal Reserve Board, and Office of the Comptroller of the Currency (OCC). The aim, the agencies said, is to achieve standards that will act as a backstop to risk-based capital requirements; and avoid discouraging covered organizations from engaging in low-risk activities.
The Fed Board approved the rule Nov. 19; the FDIC Board took its action Tuesday (the Comptroller of the Currency is an appointed board member).
The agencies said that for depository institution subsidiaries, the final rule differs from the proposal by capping the enhanced supplementary leverage ratio (eSLR) standard at 1%, making the overall requirement for these institutions no more than 4%.
“This treatment is intended to reflect differences in the capital requirements and systemic risk profile of the overall organization relative to its depository institution subsidiaries,” they said. “This change would also help ensure that the leverage standard operates as a backstop to risk-based capital requirements for depository institutions, particularly during times of stress.”
Regulators said they estimate overall levels of capital maintaind by banking organizations “will remain broadly unchanged” under the final rule. They said that in aggregate, the rule will reduce tier 1 capital requirements for affected bank holding companies by less than 2%. Depository institution subsidiaries would see greater reductions, but regulators said that capital generally would not be available for distribution to external shareholders due to capital restrictions at the holding company level.
The final rule also includes conforming changes to other regulations that are tied to the leverage capital standards, such as the total loss-absorbing capacity (TLAC) and long-term debt requirements.
Release: Agencies issue final rule to modify certain regulatory capital standards
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