First take: Supplementary leverage ratio

April 2014

Overview

The US banking regulators yesterday finalized the Enhanced Supplementary Leverage Ratio (“ESLR”) and released a Notice of Proposed Rulemaking (“NPR”) to modify the exposure calculation (i.e., the denominator) of the underlying Supplementary Leverage Ratio (“SLR”). Although the SLR was issued as a final rule by the Fed and OCC in July 2013, the agencies re-opened it, which we had suggested as a possibility in our Regulatory Brief, Heightened Leverage Ratio: US regulators unveil next act for regulating large banks (July 2013).

  1. The final ESLR disadvantages the largest US banks versus their foreign peers.
  2. US G-SIBs’ Tier 1 capital shortfall has tripled since the Fed’s prior estimation.
  3. US banks’ position is otherwise generally improved by the NPR.
  4. Banking agencies remain in separate corners.
  5. The path to achieving compliance.
  6. Cash left on the table.
  7. Managing to a new capital regime.
  8. Limiting industry comment letters on the NPR.
  9. Additional disclosure.
  10. The Fed remains confident in its monetary policy.

This First take elaborates on these key points.

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Dan Ryan
US Banking and Capital Markets Leader
Tel: +1 (646) 471 8488
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Alison Gilmore
US Asset and Wealth Management Marketing Leader
Tel: +1 (646) 471 0588
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