Fed proposing to modify enhanced supplementary leverage ratio rules for GSIBs

The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation are inviting public comment on a notice of proposed rulemaking to modify the enhanced supplementary leverage ratio standards applicable to U.S. bank holding companies identified as global systemically important bank holding companies, or GSIBs, and their depository institution subsidiaries. Specifically, the proposal would modify the enhanced supplementary leverage ratio buffer standard applicable to GSIBs to equal 50 percent of the bank holding company’s method surcharge as determined by the Board’s GSIB risk-based capital surcharge framework. The proposal would also modify the enhanced supplementary leverage ratio standard for depository institution subsidiaries of GSIBs to have the same form and calibration as the GSIB parent level standard. “The proposed modifications would help ensure that the enhanced supplementary leverage ratio standards serve as a backstop to risk-based capital requirements rather than as a constraint that is frequently binding over time and through most points in the economic and credit cycle, thus reducing potential disincentives for GSIBs and their depository institution subsidiaries to participate in low-risk, low-return businesses. The Board is also proposing to amend its total loss-absorbing capacity and long-term debt requirements to maintain alignment between these requirements and the enhanced supplementary leverage ratio standards,” a notice posted by the central bank stated. Publicly traded large banks include Bank of America (BAC), Citi (C), Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS), U.S. Bancorp (USB) and Wells Fargo (WFC).