On August 26, ISDA, the Securities Industry and Financial Markets Association (SIFMA) and FIA submitted a joint comment letter to the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), expressing strong support for the proposed recalibration of the Enhanced Supplementary Leverage Ratio (eSLR) and the related total loss-absorbing capacity (TLAC) and long-term debt (LTD) requirements. The proposed changes aim to restore the eSLR’s role as a backstop to risk-based capital requirements and to ease constraints on banking organizations’ ability to intermediate in US Treasury markets—a concern that is increasingly urgent with the upcoming transition to mandatory clearing for US Treasuries.
The comment letter emphasizes the importance of finalizing and implementing the rule by January 1, 2026.
Key points from the comment letter include:
- Support for Recalibration: The proposal would reduce the likelihood of the eSLR becoming a binding constraint, thereby reinforcing its intended backstop function and improving participation in low-risk, high-volume activities like US Treasury intermediation.
- Market Functioning: Appropriately calibrated leverage requirements are critical to maintaining liquidity and resilience in US Treasury markets, especially as mandatory clearing expands.
- Comprehensive Framework Review: The agencies should undertake a broader review of the US regulatory capital framework to ensure it supports economic growth, appropriately mitigates risk, and reflects sound risk-reducing practices such as cross-product netting.
- Further Improvements: The associations recommend recognizing cross-product netting under the standardized approach, reconsidering Tier 1 leverage ratio requirements, and eliminating redundant LTD requirements for US global systemically important banks.
These recommendations are intended to make the US regulatory capital framework more risk-sensitive, efficient, and better aligned with broader financial and economic policy goals.
Documents (1) for Joint Letter on Enhanced Supplementary Leverage Ratio Reforms
Latest
US Treasury Repo Clearing Indicators May 2026
The ISDA-Actrix US Treasury Repo Market Clearing Indicators illustrate central clearing adoption in the US Treasury repo market. Sponsored cleared repo volumes are used as a proxy to monitor client participation in central clearing, the key objective of the Securities...
ISDA, FIA, GFMA, CMC, CMCE Respond to IOSCO on Best Practices for OTC Commodity Derivatives
ISDA, FIA, the Global Financial Markets Association (GFMA), the Commodity Markets Council (CMC) and the Commodity Markets Council Europe (CMCE), have responded to the International Organization of Securities Commissions' (IOSCO) consultation report on best practices for over-the-counter (OTC) commodity derivatives...
Joint Response to 2026 US G-SIB Surcharge Proposal
On June 18, ISDA, the Securities Industry and Financial Markets Association and the Institute of International Finance submitted a joint response to US agencies on proposed changes to the surcharge for global systemically important banks (G-SIBs). The associations welcome the...
Eyeing the Basel III Finish Line
An effective regulatory capital framework relies on multiple ingredients, from appropriate drafting to rigorous testing and consultation. Even minor calibration distortions can inflate capital requirements, which could negatively affect the capacity of banks to support deep and liquid markets, with...