CONTACT: Laura Peavey
(202) 457-8770
lpeavey@fsforum.com
Forum Welcomes Finalization of Leverage Capital Proposal
Washington, D.C. – Financial Services Forum President and CEO Amanda Eversole issued the following statement after the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency acted to improve leverage-based capital requirements for U.S.-based Global Systemically Important Banks:
“Today’s decision empowers the nation’s largest banks to support critical financial markets and provide essential lending, while maintaining strength and resilience. By aligning U.S. leverage-based requirements with international standards, the new rule also creates a more level playing field for customers of U.S.-based banks.
“This action represents a meaningful step in the ongoing review of the entire U.S. regulatory capital structure. We look forward to working with regulators to ensure capital rules promote growth and safeguard the banking sector.”
Background:
Banks must maintain capital to withstand financial challenges and support the economy. Leverage-based capital requirements apply the same capital charge to all assets, regardless of risk. This means low-risk assets like cash and Treasuries receive the same leverage capital charge as higher risk and higher-yielding assets like business loans or stocks.
If holding a Treasury is as costly as a business loan, banks are forced to choose higher-returning assets, reducing the likelihood of holding Treasuries and negatively impacting demand and liquidity in the Treasury market. This ultimately leads to increased interest rates for household and business loans and increasing costs for taxpayers throughout the economy.
Addressing longstanding and bipartisan concerns with outdated leverage capital requirements will ensure America’s largest banks can better support market functions that impact Main Street businesses and consumers across the country.
For more information:
- Factsheet: Bank Leverage Capital Requirements
- Blog: The “Bank” Capital Shell Game: Would the Real Bank Capital Requirement Please Stand Up? Dispelling assertions that the proposed change would lead to a sharp decline in required capital.
- Comment letter: Forum Supports Implementation of Leverage Capital Proposal.
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The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.
Visit our website: fsforum.com