Fed: Regulators temporarily change supplementary leverage ratio rule

By Sarah Lizee

Olympia, Wash., May 15 – The federal bank regulatory agencies announced on Friday temporary changes to their supplementary leverage ratio rule, according to a notice from the Federal Reserve Board.

The temporary modifications will provide flexibility to certain depository institutions to expand their balance sheets in order to provide credit to households and businesses in light of the challenges arising from the coronavirus response, the board said.

Issued by the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, the interim final rule permits depository institutions to choose to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio.

If a depository institution does change its supplementary leverage ratio calculation, it will be required to request approval from its primary federal banking regulator before making capital distributions, such as paying dividends to its parent company, as long as the exclusion is in effect.

The agencies are providing the temporary exclusion to enable depository institutions to expand their balance sheets as appropriate to serve as financial intermediaries and serve their customers, the notice said.

The supplementary leverage ratio generally includes subsidiaries of bank holding companies with more than $250 billion in total consolidated assets. The rule requires them to hold a minimum ratio of 3%, measured against their total leverage exposure, with more stringent requirements for the largest and most systemic financial institutions.

The change will be effective once the rule is published in the Federal Register and will be in effect through March 31, 2021.

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