The Federal Reserve, alongside the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC), released their highly anticipated Notice of Proposed Rulemaking to overhaul the Enhanced Supplementary Leverage Ratio (eSLR) for the eight largest U.S. banks and their depositary subsidiaries. Currently, these global systemically important banks (GSIBs) must maintain an eSLR of 5% at the holding company level and 6% for their depository institutions.
Under the proposal, GSIB holding company eSLR is predicted to fall to between 3.5% and 4.25%. For depository institution subsidiaries of GSIBs, the proposed more flexible buffer system is predicted to lower depository institution capital requirements by about 27% and will enable banks to use the buffer during times of economic stress without triggering punitive corrective measures. The agencies state that the goal is to prevent the eSLR from becoming a "binding constraint" and will free up balance sheet capacity, particularly for treasury market intermediation and low-risk lending.
Supporters of the proposed rule, including Federal Reserve Chair Jerome Powell, Federal Reserve Vice Chair for Supervision Michelle W. Bowman and OCC Acting Comptroller Rodney Hood, argue that the changes will enhance market depth and liquidity and overall enhance financial markets. Two members of the Federal Reserve Board of Governors—former Vice Chair for Supervision Michael Barr and Governor Adriana Kugler—oppose the proposed rule, warning that it would increase systemic risk by lowering capital available to depository institution subsidiaries during times of economic stress.
The notice of proposed rulemaking is open for comments through August 26, 2025. Several prominent industry groups have already submitted comments, including the Bank Policy Institute and U.S. Chamber of Commerce, the Institute of International Bankers,the Financial Services Forum and the American Bankers Association, and the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association. The timeline for finalizing the proposed rule is unclear at this point.
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