On June 26, The Clearing House (TCH) filed a comment letter in response to the Federal Reserve and Office of the Comptroller of the Currency’s proposal regarding the enhanced supplementary leverage ratio (eSLR) standards. TCH’s letter supports the proposal’s modification of the current capital framework so that the eSLR serves not as the binding capital constraint but instead as a backstop, as the banking agencies and the Basel Committee intended, and the conforming changes to the total loss-absorbing capacity (TLAC) and eligible long-term debt (LTD) requirements applicable to U.S. GSIBs.
In the interest of improving the eSLR and TLAC requirements, the comment letter also suggested that: (i) the U.S. GSIB surcharge calibration should be reassessed in light of the eSLR requirement; (ii) the denominators for leverage capital requirements should be modified to further improve the regulatory capital framework, including by implementing the U.S. Treasury Department’s 2017 recommendations; (iii) the eSLR requirement for subsidiary IDIs of U.S. GSIBs should be implemented as a buffer requirement; and (iv) The Federal Reserve should make further changes to the TLAC SLR and LTD SLR requirements applicable to U.S. GSIBs in addition to modifying these requirements to reflect the recalibration of the eSLR.
