U.S. House Financial Services Committee Chair Maxine Waters urged the Federal Reserve Board, the FDIC and the OCC (the "banking agencies") "to not extend temporary exemptions or make any other reforms to weaken big bank capital and leverage requirements." Specifically, Chair Waters requested that the banking agencies not extend an interim final rule ("IFR") that temporarily excludes from the calculation of the supplementary leverage ratio (i) U.S. Treasury securities and (ii) deposits at Federal Reserve Banks. (See previous coverage on the adoption of the IFR.) The IFR is set to expire on March 31, 2021.
In a her letter to bank agency leadership, Chair Waters stated that it is crucial for the largest banks to maintain loss-absorbing capital, considering that the December stress test results show that some large banks would reach their regulatory capital minimums under certain adverse scenarios. She asked the banking agencies to consult with Secretary of the Treasury Janet L. Yellen, in her role as the Chair of the Financial Stability Oversight Council ("FSOC"), to "consider deploying" FSOC authority to make "recommendations regarding the establishment and refinement of prudential standards applicable to large bank holding companies to mitigate potential systemic risks."
Chair Waters also asked why the banking agencies "would allow banks to continue making capital distributions through dividend payments," citing one estimate that finds that suspended bank dividend payments could preserve roughly $40 billion of capital per year.
Primary Sources
- U.S. House Financial Services Committee Press Release: Waters Urges Regulators Not to Weaken Big Bank Leverage and Capital Requirements
- U.S. House Financial Services Committee Comment Letter: Bank Capital Leverage
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.