The federal bank regulatory agencies jointly issued a final rule that modifies certain regulatory capital standards to reduce disincentives a banking organization may have to engage in lower-risk activities, such as intermediating in U.S. Treasury markets. The final rule is substantially similar to the proposal issued in June, with changes at the depository institution level.

Like the proposal, the final rule modifies certain leverage capital standards applicable to the largest and most systemically important banking organizations to serve as a backstop to risk-based capital requirements and to avoid discouraging these organizations from engaging in low-risk activities. The rule sets the standard for these bank holding companies and their depository institution subsidiaries based on each organization’s overall systemic risk.

For depository institution subsidiaries, the final rule differs from the proposal by capping the enhanced supplementary leverage ratio standard at one percent, making the overall requirement for these institutions no more than four percent. This treatment is intended to reflect differences in the capital requirements and systemic risk profile of the overall organization relative to its depository institution subsidiaries. This change would also help ensure that the leverage standard operates as a backstop to risk-based capital requirements for depository institutions, particularly during times of stress.

The agencies estimate that overall levels of capital that banking organizations maintain will remain broadly unchanged as a result of this rule. In aggregate, the rule will reduce tier 1 capital requirements for affected bank holding companies by less than two percent. While depository institution subsidiaries would see greater reductions, that capital generally would not be available for distribution to external shareholders due to capital restrictions at the holding company level.

The final rule also includes conforming changes to other regulations that are tied to the leverage capital standards, such as the total loss-absorbing capacity and long-term debt requirements.

The final rule will take effect on April 1, 2026. Banking organizations may elect to adopt the modified standards beginning January 1, 2026.