Federal Banking Agencies Finalize the eSLR Rule, With Some Adjustments

The federal banking agencies have finalized their rule to recalibrate the enhanced Supplementary Leverage Ratio (eSLR) for U.S. global systemically important bank holding companies (GSIBs) and their covered depository institutions. The final rule sets a simple and transparent limit on a banking organization's leverage. The net effect of the rule changes should allow banking organizations to better serve their customers and the broader economy across a range of low-risk activities. The final rule largely follows the federal banking agencies' proposal with some key changes. This post focuses on what has changed.

The final rule becomes effective April 1, 2026, but banks may begin using it January 1, 2026.

Key Takeaways

• The changes to the eSLR standards would reduce the supplementary leverage ratio requirement below the level of the risk-based tier 1 capital requirement for all GSIBs and most of their subsidiary depository institutions.
• A key benefit of the final rule is that it would remove unintended disincentives for these banking organizations to engage in low-risk activities, such as U.S. Treasury market intermediation, and reduce unintended incentives, like engaging in higher-risk activities.
• Tier 1 capital requirements of GSIBs and their subsidiary depository institutions are expected to become more closely aligned with their underlying risks.
• The same eSLR buffer would be used for TLAC and long-term debt requirements and are expected to lower the funding costs of GSIBs.
• Removing barriers to holding U.S. Treasuries comes at an opportune time. The policy is consistent with payment stablecoin legislation that look to U.S. Treasuries (among other options) to back payments stablecoins. Under the new eSLR rule, this activity is now free from adverse effects on regulatory liquidity—and potentially—capital.
• These changes come on the cusp of a broader proposal to rethink the Basel III Endgame and on the heels of proposed changes to the community bank leverage ratio.

Key Elements Retained as Proposed

• GSIB holding-company eSLR buffer calibration: 50% of Method 1 surcharge (no cap) was finalized as proposed.
• The 3% SLR minimum remains unchanged for all covered organizations.
• The bank-level eSLR was moved to a buffer framework (with payout restrictions when breached), replacing the 6% "well capitalized" prompt corrective action threshold—finalized as proposed.
• No broader exclusions (reserves, Treasuries) were added to SLR exposure.

Covered Depository Institutions: New 1% Cap Added to the Buffer

The proposed rule sought to convert the bank-level eSLR from a 6% "well capitalized" threshold to a buffer equal to 50% of the parent GSIB's Method 1 surcharge, stacked on top of the 3% SLR minimum. (Aligning the bank eSLR standard with the holding company eSLR standard.) The agencies have retained the minimum supplementary leverage ratio threshold of 3% to be considered "adequately capitalized" under the prompt corrective action framework. The buffer approach is expected to provide an "early warning" mechanism, compared to the prompt corrective action framework.

The final rule adopts the buffer approach, but adds a cap. The covered depository institution's eSLR buffer is 50% of the parent GSIB's Method 1 surcharge, capped at 1%. This responds to concerns that a holding-company surcharge could unduly raise a subsidiary bank's leverage requirement. This means that even if a GSIB's Method 1 surcharge rises, the bank's eSLR buffer won't exceed 1%. Capping the buffer at one percent recognizes that the Method 1 surcharge of a parent GSIB is in part driven by activities outside of the covered depository institution.

GSIB holding-company eSLR buffer remains as proposed—50% of Method 1 surcharge (no cap).

The final rule does not adopt an adjustment to the eSLR standard calibration for banking organizations that are predominantly engaged in custody, safekeeping, and asset servicing activities (custodial banking organizations), as suggested by one commenter. The agencies noted that such custodial banking organizations are subject to a modified supplementary leverage ratio calculation required under section 402 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

TLAC and Long-Term Debt Buffers Use the Same eSLR Buffer

The final rule also adopts the proposed rule's modification of the Fed's total loss-absorbing capacity (TLAC) leverage buffer and leverage-based long-term debt (LTD) requirements for U.S. GSIBs. It uses the same leverage buffer standard in the eSLR for TLAC and LTD, replacing the fixed 2% TLAC and LTD buffers with the new eSLR based buffer. Thus, there will be uniformity between the eSLR, TLAC, and LTD buffers starting in 2026.

The Fed, however, did not add the suggested new haircuts or structural changes some commenters raised. Thus, the leverage-side TLAC buffer now tracks the eSLR buffer. The LTD leverage component adjusts to remain aligned with the recalibrated eSLR, but no broader changes were made.

OCC Scope: Proposal to Narrow Applicability Not Finalized

The proposed rule would have altered the OCC's applicability trigger to apply only to national banks and federal savings associations that are subsidiaries of GSIBs identified by the Fed (dropping the OCC's current thresholds).

However, the OCC did not finalize this change. The existing OCC thresholds remain: the eSLR under the final rule will apply to OCC-supervised institutions that are subsidiaries of a top-tier BHC with more than $700 billion in total consolidated assets or more than $10 trillion in assets under custody.

Max Bonici, Steve Gannon, and Paige Knight leverage their expertise in financial regulation, banking law, and risk assessment to provide these insights on the finalized eSLR rule for U.S. global systemically important bank holding companies (GSIBs) and their covered depository institutions. For more insights, contact Max, Steve, Paige, or another member of our financial services team and sign up for our alerts.