U.S. bank regulators modify key leverage ratio for some banks

[Sergey Golubev]

U.S. bank regulators modify key leverage ratio for some banks

Federal banking regulators temporarily modify their supplementary leverage ratio rule to provide flexibility to certain banks.

The financial institutions are allowed to choose to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio calculation.

If they choose to change the ratio calculation, they 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 this temporary exclusion to enable depository institutions to expand their balance sheets in order to provide credit to households and businesses in light of challenged related to the coronavirus response.

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

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