Notice of Proposed Rulemaking: Modifications to the Enhanced Supplementary Leverage Ratio Standards for U.S. Global Systemically Important Bank Holding Companies and Their Subsidiary Depository Institutions

June 29, 2025 / Source: OCC

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) are requesting comment on a proposal to modify the enhanced supplementary leverage ratio standards, which apply to the largest and most systemically important banking organizations in the United States. The proposed modifications would help ensure that the enhanced supplementary leverage ratio standards will serve as a backstop to risk-based capital requirements, thus reducing potential disincentives for global systemically important bank holding companies (GSIBs) and their depository institution subsidiaries to participate in low-risk, low-return businesses.

The OCC encourages stakeholders to review the proposed rule and provide comments before the close of the comment period on August 26, 2025.

Note for Community Banks

This proposal would not apply to any community banks. It would apply only to the largest and most systemically important holding companies and their depository institution subsidiaries.

Highlights

• The proposal would set the enhanced supplementary leverage ratio so that it is based on a banking organization’s systemic risk profile. Specifically, the proposal would modify the enhanced supplementary leverage ratio buffer standard applicable to GSIBs to equal 50 percent of the holding company’s method 1 risk-based capital surcharge as determined by the Federal Reserve Board’s GSIB surcharge framework. Using the current method 1 surcharge, the enhanced supplementary leverage ratio standards would range from 3.5 percent to 4.25 percent instead of the current 5 percent at the holding company and 6 percent at the depository institution.
• The proposal would also modify the enhanced supplementary leverage ratio standard for depository institution subsidiaries of GSIBs to have the same form as the GSIB parent-level standard. Aligning the form of the depository institution enhanced supplementary leverage ratio standard with that of the holding company could enhance effective capital management across a banking organization.
• Specifically, the proposal would remove the enhanced supplementary leverage ratio threshold for a depository institution subsidiary of a GSIB to be considered “well capitalized” under the prompt corrective action framework and would instead implement the enhanced supplementary leverage ratio for such banking organizations as a buffer standard.
• The OCC is also proposing to revise the methodology it uses to identify which national banks and federal savings associations (collectively, “banks”) are subject to the enhanced supplementary leverage ratio standards to better align with the agencies’ regulatory tailoring framework for large banking organizations and to ensure that the standards apply only to those banks that are subsidiaries of a GSIB. This proposed change would not have any impact on the current application of the enhanced supplementary leverage ratio standards.
• The agencies are also requesting comment on additional ways to modify the supplementary leverage ratio and reduce disincentives for low-risk activities.

Background

GSIBs and their depository institution subsidiaries are subject to several capital regulations, including both risk-based and leverage capital requirements. Risk-based capital requirements vary based on the risks of the individual exposure, treating differently, for example, a Treasury security with lower risk and a corporate bond with higher risk. Leverage capital requirements, by design, treat all exposures equally. A leverage capital requirement that is regularly a binding constraint can discourage a bank from engaging in low-risk activities, such as U.S. Treasury market intermediation.

The proposed modifications would help ensure that the enhanced supplementary leverage ratio standards will serve as a backstop to risk-based capital requirements rather than 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 agencies anticipate that the amount of overall capital that banking organizations maintain would not materially change as a result of this proposal. In aggregate, the proposal would reduce tier 1 capital standards for affected bank holding companies by less than 2 percent. While certain depository institution subsidiaries could see greater reductions, the vast majority of that capital would not be available for distribution to external shareholders given the bank holding company level requirements.

Further Information

Please contact Carl Kaminski, Assistant Director, Chief Counsel’s Office, at (202) 649-5490, or Venus Fan, Risk Expert, or Benjamin Pegg, Technical Expert, Capital Policy, at (202) 649-6370.

Stuart E. Feldstein
Acting Principal Deputy Chief Counsel

Related Link

• Federal Register Notice (PDF)