On April 8, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (collectively, Agencies) adopted a final rule to strengthen the leverage ratio standards for the largest, most interconnected US banking organizations. The final rule applies to US top-tier bank holding companies with more than $700 billion in consolidated total assets or more than $10 trillion in assets under custody (covered BHCs) and their insured depository institution (IDI) subsidiaries. A covered BHC must maintain a leverage buffer greater than two percentage points above the minimum supplementary leverage ratio requirement of three percent, for a total of more than five percent, to avoid restrictions on capital distributions and discretionary bonus payments. An IDI subsidiary of a covered BHC must maintain at least a six percent supplementary leverage ratio to be considered “well capitalized” under the Agencies’ prompt corrective action framework. The final rule, which has an effective date of January 1, 2018, currently applies to eight large US banking organizations that meet the size thresholds and their IDI subsidiaries. The final rule is substantively the same as the rule proposed by the Agencies in July 2013.

Also on April 8, the Agencies issued a notice of proposed rulemaking (NPR) that would modify the denominator calculation for the supplementary leverage ratio in a manner consistent with recent changes agreed to by the Basel Committee on Banking Supervision. The revisions in the NPR would apply to all internationally active banking organizations, including those subject to the enhanced supplementary leverage ratio final rule. The Agencies believe the denominator changes in the NPR would more appropriately measure leverage capital requirements and would, in aggregate, increase the requirements across these institutions. The Agencies also issued a separate NPR proposing a technical correction to the definition of “eligible guarantee” in the Agencies’ risk-based capital rules. Comments on both NPRs will be welcomed through June 13, 2014. 

In a separate action, the FDIC Board also adopted as final its Basel III interim final rule, which is substantively identical to the final rules adopted by the Federal Reserve Board and the OCC in July 2013.