FDIC eases leverage rules for banks, citing lower risk burdens

The U.S. Federal Deposit Insurance Corporation (FDIC) issued a final rule to change the leverage capital requirements for both large and community banks. The agency said the modification will ”reduce disincentives a banking organization may have to engage in lower-risk activities.”

Under the new rule, depository institution subsidiaries will see their enhanced supplementary leverage ratio (eSLR) lowered to 1 percent, requiring them to hold less money against low-risk assets such as U.S. Treasuries, according to an FDIC press release posted Tuesday. The overall leverage requirement for these institutions will be capped at 4 percent, and the agency estimates the change could free up more than $200 billion in capital. In the release, the FDIC says the freed-up money would not be available to distribute to external shareholders as the holding companies will still have to abide by capital restrictions.