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Wednesday, July 10, 2013

Agencies Propose Supplementary Leverage Ratio for Large Banks

The FDIC, OCC and Federal Reserve Board yesterday jointly proposed doubling the supplementary leverage ratio for large, systemically significant financial firms. This leverage ratio would be in addition to the Basel III capital requirements.

The rule, which applies to bank holding companies with over $700 billion in assets (or with over $10 trillion in assets under custody) and their subsidiaries, would require banks to meet a 6 percent supplementary leverage ratio in order to be considered “well-capitalized” for prompt corrective action purposes, or double the ratio required under the Basel III rule finalized last week.

In addition, bank holding companies would be required to maintain a Tier 1 capital leverage buffer of at least 5 percent. Failure to meet this standard would limit companies’ ability to pay discretionary bonuses and make capital distributions.

The rule is proposed to take effect in January 2018. Comments will be due 60 days after its publication in the Federal Register.

The FDIC and OCC also yesterday adopted the Basel III rule finalized by the Fed last week.

Read more.

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