US federal bank regulatory agencies have issued a final rule changing certain capital standards for large banking organizations. The FDIC, Federal Reserve Board, and OCC jointly issued the new rule to encourage lower-risk activities, effective April 1, 2026. The rule sets leverage capital standards for bank holding companies and subsidiaries, limiting the eSLR to 1%. This move aims to maintain overall capital levels while reducing tier 1 capital requirements by less than 2%.

The new rule aims to address disincentives for banks to engage in lower-risk activities, including intermediating in US Treasury markets. It takes effect on April 1, 2026, with organizations able to adopt the modified standards as early as January 1, 2026. The rule sets leverage capital standards based on the systemic risk profile of each organization and limits the eSLR to 1% for depository institution subsidiaries.

The agencies stated that the rule will contribute to differences in capital requirements between holding companies and subsidiaries. It ensures the leverage standard acts as a backstop to risk-based capital requirements, particularly in times of financial stress. The rule amends regulations related to total loss-absorbing capacity and long-term debt requirements, aiming to revise rules established after the global financial crisis.

The overall capital levels maintained by banking organizations are expected to remain largely unchanged as a result of the final rule. The rule reduces tier 1 capital requirements by less than 2% for affected bank holding companies. Depository institution subsidiaries would see greater reductions, but that capital generally would not be available for distribution to external shareholders due to capital restrictions at the holding company level.

Read more at Yahoo Finance: US agencies issue final capital rule for banks