Concurrent with the approval of the new regulatory capital rules, the federal banking agencies have proposed a rule to require bank holding companies with more than $700 billion in consolidated total assets or $10 trillion in assets under custody to maintain a tier 1 capital leverage buffer of at least 2 percentage points above the minimum supplementary leverage ratio requirement of 3%. Comments on the proposal will be due 60 days after it is published in the Federal Register, which is expected shortly.
Nutter Notes: Failure to exceed the 2% supplementary leverage buffer would subject covered bank holding companies to restrictions on discretionary bonus payments and capital distributions similar to those imposed for failure to exceed the capital conservation buffer. In addition, the proposed rule would require insured depository institution subsidiaries of covered holding companies to meet a 6% supplementary leverage ratio to be considered “well capitalized” for prompt corrective action purposes. The proposed rule would currently apply to the 8 largest U.S. banking organizations.