Letter to the Agencies on the Enhanced Supplementary Leverage Ratio Standards

Dear Sir or Madam,

The American Bankers Association (ABA) appreciates the opportunity to comment on the agencies' proposal (the Proposal) to modify the enhanced Supplementary Leverage Ratio (eSLR), Total Loss-Absorbing Capacity (TLAC), and Long-Term Debt (LTD) requirements for large banks identified as global systemically important banks (collectively, GSIBs).

ABA strongly supports the agencies' Proposal to recalibrate the fixed two percent eSLR buffer to equal 50 percent of a GSIB's Method 1 surcharge. This change is an important and overdue step toward restoring the eSLR's intended role as a backstop to risk-based capital requirements, rather than frequently becoming a binding constraint that distorts bank behavior and impairs efficient market function. Further, we strongly support aligning the application of the eSLR standard for OCC-regulated banks to ensure a consistent scope of application across the Federal banking agencies.

We also support the proposed conforming changes to TLAC and LTD requirements, which would maintain alignment across the capital framework. We urge the agencies to finalize the Proposal promptly. We also encourage the agencies to revisit the need for long-term debt requirements. While we continue to support an appropriately calibrated TLAC requirement for covered GSIB BHCs, as we and others in the industry have previously noted, a separate long-term debt requirement is unnecessary and should be eliminated as part of future rulemaking efforts.

Finally, we encourage the agencies to continue exploring broader leverage ratio reforms in future rulemakings. In particular, we reiterate ABA's longstanding position that certain low-risk and riskless assets—such as deposits held at Federal Reserve Banks (reserves), cash, and U.S. Treasury securities—should be excluded from leverage ratio calculations. The inclusion of these assets undermines the metric's role as a backstop and can disincentivize banks from engaging in stabilizing activities during times of stress. Their exclusion would restore the ratio's intended function and provide banks with critical flexibility to accommodate deposit inflows and facilitate Treasury market intermediation during flights to safety. By counting low-risk assets toward the leverage ratio, the framework inadvertently penalizes banks for performing these essential functions when they are most needed.

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