United States: Financial Services Chair Urges Banking Agencies To Let Leverage Relief Expire
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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
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