Multiple Agencies Agree to Potential Basel Changes

The Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have adopted a final rule modifying the definition of the denominator of the supplementary leverage ratio in a manner consistent with recent changes agreed to by the Basel Committee on Banking Supervision. The revisions to the supplementary leverage ratio apply to all banking organizations subject to the advanced approaches risk-based capital rule. The changes strengthen the ratio by more appropriately capturing a banking organization's on- and off-balance sheet exposures, and based on estimates, would increase the aggregate measure of exposure across firms. The final rule modifies the methodology for including off-balance sheet items, including credit derivatives, repo-style transactions, and lines of credit, in the denominator of the supplementary leverage ratio. The final rule also requires institutions to calculate total leverage exposure using daily averages for on-balance sheet items and the average of three month-end calculations for off-balance sheet items. Certain public disclosures required by the final rule must be made starting in the first quarter of 2015 and the minimum supplementary leverage ratio requirement using the final rule's denominator calculations is effective Jan. 1, 2018. This rule finalizes the joint notice of proposed rulemaking released on April 8, 2014, with certain revisions and clarifications based on comments received on the proposed rule.