The Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are seeking public comments on a proposal that would modify certain regulatory capital standards to reduce disincentives for banking organizations to engage in lower-risk activities and promote the smooth functioning of U.S. Treasury markets.
The proposal would modify certain leverage capital standards, applicable to the largest and most systemically important banking organizations, so they do not discourage banking organizations from engaging in low-risk activities.
The enhanced supplementary leverage ratio for both bank holding companies and their depository institution subsidiaries would be based on a banking organization’s overall systemic risk.
In addition, other regulations tied to the enhanced supplementary leverage ratio, including total loss-absorbing capacity and long-term debt requirements, would see conforming changes.
The proposal would reduce tier 1 capital standards for affected bank holding companies by less than 2 percent, although certain depository institution subsidiaries could experience greater reductions.
The agencies expect the amount of overall capital that banking organizations maintain generally would stay the same. For the subsidiaries that experience greater reductions, capital generally would not be available for distribution to external shareholders because of restrictions.
Comments are due by Aug. 26.