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The federal bank regulatory agencies have finalized changes to a capital requirement for banking organizations predominantly engaged in custodial activities, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).  The final rule is unchanged from the proposal issued for public comment in April 2019.

The EGRRCPA requires the agencies to permit certain banking organizations—those predominantly engaged in custody, safekeeping, and asset servicing activities—to exclude qualifying deposits at certain central banks from their supplementary leverage ratio.  The supplementary leverage ratio is one of many tools used by the federal bank regulatory agencies to determine minimum required capital levels and ensure financial stability in the event of stress in the banking system.  It applies only to large or complex internationally active banking organizations.

Based on current data, only The Bank of New York Mellon Corporation, Northern Trust Corporation, and State Street Corporation, together with their depository institution subsidiaries, would qualify for the rule.

The final rule will be effective April 1, 2020.