Regulatory Capital Rules

Monday, April 14, 2014 / Published in Featured News, Articles of Interest
Regulatory Capital Rules
Regulatory Capital Rules: Regulatory Capital, Enhanced Supplementary Leverage Ratio Standards for Certain Bank Holding Companies and their Subsidiary Insured Depository Institutions.
AGENCIES: Office of the Comptroller of the Currency, Treasury; the Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation.

ACTION: Final rule. 


SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board of Governors of  the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC)  (collectively, the agencies) are adopting a final rule that strengthens the agencies' supplementary 2 leverage ratio standards for large, interconnected U.S. banking organizations (the final rule). The final rule applies to any U.S. top-tier bank holding company (BHC) with more than $700 billion in total consolidated assets or more than $10 trillion in assets under custody (covered BHC) and any insured depository institution (IDI) subsidiary of these BHCs (together, covered organizations). In the revised regulatory capital rule adopted by the agencies in July 2013 (2013 revised capital rule), the agencies established a minimum supplementary leverage ratio of 3 percent, consistent with the minimum leverage ratio adopted by the Basel Committee on Banking Supervision (BCBS), for banking organizations subject to the agencies’ advanced approaches risk-based capital rules. The final rule establishes enhanced supplementary leverage ratio standards for covered BHCs and their subsidiary IDIs. Under the final rule, an IDI that is a subsidiary of a covered BHC must maintain a supplementary leverage ratio of at least 6 percent to be well capitalized under the agencies' prompt corrective action (PCA) framework. The Board also is adopting in the final rule a supplementary leverage ratio buffer (leverage buffer) for covered BHCs of 2 percent above the minimum supplementary leverage ratio requirement of 3 percent. The leverage buffer functions like the capital conservation buffer for the risk-based capital ratios in the 2013 revised capital rule. A covered BHC that maintains a leverage buffer of tier 1 capital in an amount greater than 2 percent of its total leverage exposure is not subject to limitations on distributions and discretionary bonus payments under the final rule. 

Elsewhere in today's Federal Register, the agencies are proposing changes to the 2013 revised capital rule's supplementary leverage ratio, including changes to the definition of total leverage exposure, which would apply to all advanced approaches banking organizations and thus, if adopted, would affect banking organizations subject to this final rule. 
EFFECTIVE DATE: The final rule is effective January 1, 2018.