Fed Makes Temporary Change to Supplementary Leverage Ratio Calculation

The Federal Reserve announced today that it will temporarily exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio for holding companies, effective March 31. This action—the latest the Fed has taken to allow the continued flow of credit to households and businesses—comes amid deteriorating conditions in the Treasury market, significant inflows of consumer deposits and increased reserve levels.

“The board is providing the temporary exclusion in the interim final rule to allow banking organizations to expand their balance sheets as appropriate to continue to serve as financial intermediaries, rather than to allow banking organizations to increase capital distributions, and will administer the interim final rule accordingly,” the Fed said, adding that this change would temporarily decrease tier 1 capital of holding companies by approximately 2% in aggregate.