WASHINGTON — The banking regulators are temporarily easing one of the key capital rules for large U.S. banks to help institutions respond to the economic fallout from the coronavirus pandemic, the agencies said Friday.
The interim rule change will allow banks to exclude U.S. Treasury securities and deposits at Federal Reserve banks from the calculation of their supplementary leverage ratios.
The SLR requires banks with more than $250 billion of assets to maintain an extra cushion of high-quality capital against an institution's total assets. Institutions subject to the requirement must maintain a minimum 3% ratio against their total leverage exposure, with even tougher requirements for the most complex firms.
The Fed, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency said the change would allow banks to expand their balance sheets to continue lending to customers and businesses feeling the economic effects from the pandemic.
Previously, the Fed said in April that it would allow holding companies to exclude U.S. Treasury securities and deposits at Fed banks from the calculation of their SLRs.
If a financial institution does decide to exclude those assets from the calculation of its SLR, it will have to get approval from its primary banking regulator before making capital distributions, including paying dividends, the agencies said.
The temporary rule change will be effective once it is published in the Federal Register and will remain in effect until March 31, 2021, but the agencies are also accepting feedback on the rule change for 45 days after it goes into effect.
