Although Congress has historically been chary of setting the specifics of regulatory capital standards, the new financial-reform law includes several provisions expressly resetting current rules. The most significant of these redefine the role of the leverage ratio (LR) in the broad U.S. capital framework, distancing the U.S. from one aspect of the Basel standards and creating an LR-only standard for banking organizations with assets of less than $10 billion. Eligible banks and BHCs below this threshold would come under only an LR set between eight and ten percent. This is higher than the rules now require but about where the LR in fact stands at most affected banking organizations. Unlike an LR-only option in House legislation, the law does not include an “off-ramp” from most prudential regulations for these smaller banking companies. Banks may also exempt reserves held at central banks related to custody operations from the supplementary leverage ratio (SLR) if they meet criteria designating eligible custody banks.
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