June 25, 2018

Via Electronic Mail

Office of the Comptroller of the Currency
400 7th Street, SW, Suite 3E-218
Mail Stop 9W-11
Washington, DC 20219
Attention: Legislative and Regulatory Activities Division
Docket ID OCC–2018–0002; RIN1557–AE35

Board of Governors of the Federal Reserve System
20th Street & Constitution Avenue, N.W.
Washington, D.C. 20551
Attention: Ann E. Misback, Esq., Secretary
Docket No. R–1604; RIN 7100 AF–03

Re: Regulatory Capital Rules: Regulatory Capital, Enhanced Supplementary Leverage Ratio Standards for U.S. Global Systemically Important Bank Holding Companies and Certain of Their Subsidiary Insured Depository Institutions; Total LossAbsorbing Capacity Requirements for U.S. Global Systemically Important Bank Holding Companies

Ladies and Gentlemen:

The Clearing House Association L.L.C., the Securities Industry and Financial Markets Association, the Financial Services Roundtable, and the International Swaps and Derivatives Association (together, the “Associations”)1 appreciate the opportunity to comment on the Agencies’ proposal2 to revise the enhanced supplementary leverage ratio (“eSLR”) requirements applicable to U.S. GSIBs and their subsidiary insured depository institutions (“IDIs”) and to make conforming changes to the total loss-absorbing capacity (“TLAC”) and eligible long-term debt (“LTD”) requirements applicable to U.S. GSIBs.

The Associations continue to support leverage requirements as a simple backstop to riskbased capital requirements. However, in light of the significant shortcomings of a leverage ratio measure,3 we continue to believe it is critical that any leverage requirement be set as a backstop, and not as the predominant – or even a primary – capital requirement in ordinary circumstances; the latter would drive misallocation of capital in the economy – as any measure that ignores risk is bound to do if applied as a binding constraint – and discourage low-risk, lowreturn activities that are critical to the effective functioning of the banking system and financial markets. Accordingly, the Proposal’s modifications to the capital framework would represent a marked improvement toward making leverage requirements a backstop measure, as intended by the Agencies4 and the Basel Committee,5 and not a binding constraint. Furthermore, in light of the risk-based capital requirements and other aspects of the U.S. capital framework, the proposed changes to the eSLR requirements would not appreciably reduce Tier 1 capital requirements for U.S. GSIBs or affect the overall resilience of the banking sector or financial system.

To further improve the role of leverage requirements in the context of the larger bank capital framework, we provide in this letter a range of suggestions, including changes to the TLAC SLR and LTD SLR requirements, that we believe would enhance the eSLR and related capital frameworks.

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1 Descriptions of the Associations are provided in Annex A of this letter.

2 83 Fed. Reg. 17317 (Apr. 19, 2018).

3 See, e.g., Greg Baer, The Clearing House, The Leverage Ratio: Neither Simple Nor Sensible (June 26, 2017), available at https://www.theclearinghouse.org/advocacy/articles/2017/06/26 leverage-ratio; The Clearing House, Comment Letter Re: Stress Testing Transparency Proposals (Docket Nos. OP-1586, OP1587 and OP-1588) (Jan. 22, 2018), at Annex A 3-5, available at https://www.theclearinghouse.org/-/media/tch/documents/tchweekly/2018/20180122_tch_comment_letter_re_stress_testing_transparency.pdf.

4 See 83 Fed. Reg. 17317, 17319 (“Leverage capital requirements should generally act as a backstop to the risk-based requirements.”); see also Vice Chairman for Supervision Randal K. Quarles, Liquidity Regulation and the Size of the Fed’s Balance Sheet (May 4, 2018), at 2 (“The proposed change [to the eSLR] simply restores the original intent of leverage requirements as a backstop measure to risk-based capital requirements.”), available at https://www.federalreserve.gov/newsevents/speech/files/quarles20180504a.pdf.

5 See Basel Committee, Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems (Dec. 2010, rev. June 2011), at 2 and 61, available at https://www.bis.org/publ/bcbs189.pdf.