Kansas City Fed releases semi-annual update of the Bank Capital AnalysisNovember 12, 2020
FOR IMMEDIATE RELEASE
November 12, 2020
CONTACT: Victoria Rosengarten, 816/881-2308
KANSAS CITY, MISSOURI – The Federal Reserve Bank of Kansas City today released the June 30, 2020 results from its semiannual Bank Capital Analysis (BCA), which provides an objective and data-based approach to judging capital strength across the banking industry. The BCA presents leverage ratios for individual U.S. global systemically important banks (G-SIBS), non-U.S. G-SIBs, and three other groups of institutions in the United States: large, regional and community banking organizations.
As of June 30, 2020, the weighted average supplementary leverage ratio (SLR), also known as the Basel III leverage ratio, for U.S. G-SIBs was 7.0 percent, up 61 basis points from December 31, 2019. This increase is primarily attributed to the Federal Reserve’s temporary capital relief that allows firms to exclude U.S. Treasury securities and deposits held at Federal Reserve Banks from the leverage exposure measure of the SLR, which is designed to allow for continued financial market intermediation as balance sheets expand due to COVID-19. This temporary relief has resulted in total leverage exposure declining by a combined $2 trillion for the U.S. GSIBs. Without the temporary SLR exclusion, the weighted average SLR for U.S. GSIBs would have been 96 basis points lower at 6.05 percent. Additionally, the median price-to-book ratio for U.S. GSIBs fell below one (.87) at June 30, 2020, down 37 basis points from 2019 year-end. The weighted average Basel III leverage ratio across foreign G-SIBs declined over this period and remains lower than that of U.S. GSIBs.
Over this same timeframe, U.S. G-SIBs’ weighted average tier 1 leverage ratio declined 70 basis points to 7.3 percent, while their tier 1 risk-based capital ratios remained fairly stable at 13.7 percent. U.S. G-SIBs’ leverage ratios remain below leverage capital ratios for large (9.0 percent), regional (9.1 percent) and community (10.1 percent) banking organizations. Tier 1 leverage ratios at large, regional and community banking organizations declined by 111, 76 and 73 basis points, respectively, due to balance sheet growth driven by participation in COVID-19 stimulus programs.
As the regional headquarters of the nation’s central bank, the Federal Reserve Bank of Kansas City and its branches in Denver, Oklahoma City and Omaha serve the seven states of the Tenth Federal Reserve District: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri, home to more than 740 regional and community banks.
 Total leverage exposure, the denominator of the SLR, includes certain off-balance sheet exposures in addition to on-balance sheet assets.
 Jurisdictions in Japan, Switzerland and Canada also offered some form of temporary leverage ratio relief as of June 30, 2020. Temporary relief from the leverage ratio will also extend to GSIBs in the European Union going forward through June 2021 per a September 17, 2020 announcement from the European Central Bank.