The American Bankers Association today recommended that federal regulators quickly finalize a series of proposed changes to the enhanced supplementary leverage ratio standards for the largest banks.
In June, the Federal Reserve, FDIC and Office of the Comptroller of the Currency issued a proposal to replace the current 2% eSLR buffer with a buffer equal to half of the global systemically important bank’s Method 1 surcharge. For GSIB bank subsidiaries, the proposal replaces the 3% eSLR buffer with a buffer also half of the GSIB’s Method 1 surcharge. It would also make conforming changes to total loss-absorbing capacity and long-term debt requirements.
ABA said in a letter to the agencies that it strongly supports the proposal. The association also encouraged the agencies to revisit the need for long-term debt requirements and to continue exploring broader leverage ratio reforms in future rulemaking.
“In particular, we reiterate ABA’s longstanding position that certain low-risk and riskless assets — such as deposits held at Federal Reserve Banks (reserves), cash and U.S. Treasury securities — should be excluded from leverage ratio calculations,” ABA said. “The inclusion of these assets undermines the metric’s role as a backstop and can disincentivize banks from engaging in stabilizing activities during times of stress.”
