On September 15, 2016, Comptroller of the Currency Thomas J. Curry addressed how the US federal banking system has progressed since the Great Recession and the 2008 financial crisis, the strength of US banks today and the need for continued vigilance to manage risks. Among other things, the Comptroller discussed leverage ratios and their role as an additional line of defense, or backstop, to the risk-based capital measures. Curry criticized the proposals of some to “water down” the ratios by manipulating what is included or excluded from consideration and stressed the need for clear definitions that accurately and transparently capture the leverage of regulated banks. Curry argued that “weakening the ratio through special exclusions only undermines our original intent and weakens the protection against excessive leverage.” He further noted that while some wish to exclude certain assets from measures of leverage on the grounds that it could affect certain business lines’ profitability, “the essence of assessing a bank’s leverage is about comparing its equity to its assets, and carving out various assets would cut against the very meaning of leverage.”
Comptroller Curry’s full remarks are available at: http://www.occ.gov/news-issuances/speeches/2016/pub-speech-2016-113.pdf.