Federal Agencies Issue Enhanced Supplementary Leverage Ratio Final Rule for Largest Banking Organizations and Propose Update to Supplementary Leverage Ratio Rule

On Tuesday, April 8, 2014, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (together, the "Agencies") jointly issued a final rule that establishes an enhanced supplementary leverage ratio for the largest United States banking organizations.  The Agencies issued this rule pursuant to their authority to establish capital requirements for depository institutions under the Federal Deposit Insurance Act and Sections 165 and 171 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act").

The final rule applies to U.S. bank holding companies with more than $700 billion in consolidated total assets or more than $10 trillion in assets under custody ("covered BHCs") and their insured depository institution subsidiaries ("IDIs").  Covered BHCs will be required to maintain an enhanced leverage ratio of 5 percent, which is 2 percent greater than the supplementary leverage ratio of 3 percent, or will face restrictions on capital distributions and discretionary bonus payments.  Further, IDIs must maintain at least a 6 percent supplementary leverage ratio to be considered "well capitalized" under the Agencies' prompt corrective action framework.

Additionally, the Agencies proposed a revision to the supplementary leverage ratio rule, to implement recent changes agreed to by the Basel Committee on Banking Supervision.  The proposed revision would modify the calculation used to determine the denominator in the supplementary leverage ratio, and is expected to increase leverage capital requirements.  The proposed revision would apply to all internationally active banking organizations, including the covered BHCs subject to the enhanced supplementary leverage ratio final rule above.

Read the joint release.

SEC Proposes Recordkeeping and Reporting Rules for Security-Based Swap Dealers and Major Security-Based Swap Participants

On Thursday, April 17, 2014, the Securities and Exchange Commission (the "SEC") proposed new rules regarding recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.  The proposed rules would also establish additional recordkeeping requirements for broker-dealers to account for their security-based swap activities.  The SEC proposed these rules pursuant to Section 764 of the Dodd-Frank Act, and as part of the comprehensive framework to regulate the over-the-counter swaps and security-based swaps markets established by Title VII of the Dodd-Frank Act.

Read the SEC release.

Read the proposed rule.

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