On September 3, 2014, the Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC):

The LCR creates a standardized minimum liquidity requirement for large and internationally active banking organizations. The LCR will apply to banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposure, as well as any of their depository institutions that have assets of $10 billion or more. The rule also will apply a less stringent, modified LCR to bank holding companies and savings and loan holding companies that do not meet these thresholds but have $50 billion or more in total assets. Bank holding companies and savings and loan holding companies with substantial insurance or commercial operations are not covered by the final rule.

The LCR will require covered institutions to hold high quality, liquid assets (HQLA) such as central bank reserves and government and corporate debt that can be converted easily and quickly into cash in an amount equal to or greater than its projected cash outflows minus its projected cash inflows during a 30-day stress period.

The final rule is largely identical to the proposed rule, which was initially proposed in October 2013 (see Legal Update, Liquidity Coverage Rule Proposed for Financial Institutions). Important changes from the proposed rule include:

The LCR Rule does not apply to non-bank financial companies designated as systemically significant by the Financial Stability Oversight Council. The Federal Reserve Board plans to apply enhanced prudential liquidity standards to these institutions through a subsequently issued order or rule following an evaluation of the business model, capital structure, and risk profile of each designated nonbank financial company.

Although the LCR Rule is consistent with the Basel Committee's LCR standard, it is more stringent in certain areas, including a shorter transition period for implementation. Covered US institutions must be fully compliant with the rule by January 1, 2017.

The Supplementary Leverage Ratio Rule modifies the definition of the denominator of the supplementary leverage ratio under previous proposed rulemaking to correspond with recent changes agreed to by the Basel Committee on Banking Supervision (see Legal Update, Tough New Supplementary Leverage Ratios Will Require Banks to Raise More Capital) . This rule applies to all banking organizations that are subject to the advanced approaches risk-based capital rules. The final rule modifies the method in which off-balance sheet items such as credit derivatives, repo-style transactions and lines of credit are included in the denominator of the supplementary leverage ratio. It also requires institutions to calculate total leverage exposure using daily averages for on-balance sheet items and the average of three month-end calculations for off-balance sheet items.

The final rule is effective on January 1, 2015, and certain public disclosures required by the final rule must be made at that time. The minimum supplementary leverage ratio requirement using the denominator calculations set out in the final rule is effective on January 1, 2018.