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Temporary Exclusion of U.S. Treasury Securities and Deposits at Federal Reserve Banks from the Supplementary Leverage Ratio for Depository Institutions

Capital
May 15, 2020

Summary:

The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System have published an interim final rule (IFR) that allows for the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks from the supplementary leverage ratio (SLR). The modification will provide flexibility to certain depository institutions to provide credit to households and businesses in light of the challenges arising from the coronavirus response.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter (FIL) is only applicable to a depository institution subsidiary of a U.S. global systemically important bank holding company or a depository institution subject to Category II or Category III capital standards.

Highlights:

  • Under the IFR, a depository institution subsidiary of a U.S. global systemically important bank holding company or a depository institution subject to Category II or Category III capital standards (electing depository institutions) may elect to exclude deposits at Federal Reserve Banks and Treasuries from the SLR.
  • An electing depository institution must notify its primary federal banking regulator of its election within 30 days after the IFR is effective. An FDIC-supervised electing institution must provide this notice in writing to the institution's FDIC Regional Director of the Division of Risk Management Supervision (Regional Director).
  • An electing depository institution may reflect the exclusion of deposits at Federal Reserve Banks and Treasuries as if the IFR had been in effect for the entire second quarter of 2020.
  • Beginning in the third quarter of 2020 through March 31, 2021, an electing depository institution is required to obtain approval from its primary federal banking regulator before making a distribution, or creating an obligation to make a distribution, so long as the temporary exclusion is in effect. The capital rule defines distributions to include both share repurchases and dividends.
  • An FDIC–supervised electing institution must make a distribution request to the institution's Regional Director. The FDIC will respond within 14 days with an approval, disapproval, or request for additional information.
  • The IFR is effective as of the date of Federal Register publication and will remain in effect through March 31, 2021.

Suggested Distribution:

FDIC-Supervised Institutions

Suggested Routing:

Chief Executive Officer
Chief Financial Officer
Chief Risk Officer

Attachment(s)
Risk-Based Capital Rules, 12 CFR Part 324

Last Updated: May 15, 2020