Senate Banking Committee Democrats Urge Extended Review of eSLR Proposal

Senate Banking Committee Democrats urged top US banking regulators to release detailed data and analysis on the economic impacts of a proposed cut to the enhanced supplementary leverage ratio ("eSLR").

In a letter to Federal Reserve Vice Chair for Supervision, Comptroller of the Currency and Acting FDIC Chair, the Senators pressed the agencies to release detailed assessments of the proposal's short- and long-term effects, including potential risks, before finalizing any rule changes. They also requested a 90-day extension of the public comment period, a period to begin once the supplemental information is published. They argued that the current 60-day window is inconsistent with prior practice for proposals "of this magnitude."

The Senators said the eSLR is a key safeguard and warned that lowering the requirement—by an average of 23% for holding companies and 36% for insured depository subsidiaries—could reduce capital levels by more than $200 billion. They also warned that reducing capital levels would "increase the leverage" of the biggest banks, raise the likelihood of failures and impose greater costs on taxpayers through the Deposit Insurance Fund. The Senators also questioned the agencies' rationale for eliminating the higher eSLR requirement for bank subsidiaries, which they described as an "extra taxpayer protection."

The Senators pressed the agencies to address a range of concerns about the eSLR proposal, including its potential to reduce capital by over 27% at the largest banks, increase the risk and cost of GSIB failures and diminish protections for taxpayers. They asked for updated capital impact estimates based on 2025 stress test results, projections for the proposal's effect on lending, and analysis of possible consequences for the Treasury market and housing sector.

The Senators also sought justification for key policy changes, such as eliminating the higher subsidiary-level requirement, setting the eSLR at half the "Method 1" surcharge, and, in some cases, making it weaker than the general leverage ratio. They requested explanations as to how the proposal compares with other market reform options and how the proposal might interact with related regulatory rollbacks.