Federal regulators are seeking public comments on proposed rulemaking that could greatly increase the capital buffer the nation's largest banks must hold.

Public comments are sought for the notice of proposed rulemaking (NPR) issued jointly by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System , and Federal Deposit Insurance Corporation. The 60-day comment period began on Tuesday with the NPR's publication in the Federal Register. The deadline for feedback is Oct. 21.

The revised capital regulations, approved by the OCC on July 9, establishes a minimum supplementary leverage ratio of 3 percent, a requirement consistent with standards adopted by the international Basel Committee on Banking Supervision.

The calculation of the supplementary leverage ratio differs from the current, generally applicable, leverage ratio in the U.S. The latter is the ratio of an institution's tier 1 capital to its total on-balance-sheet assets. The supplementary leverage ratio, however, is the ratio of an institution's tier 1 capital to its total leverage exposure, which includes all on-balance-sheet assets and many off-balance-sheet exposures. For banks with material off-balance-sheet exposures, the minimum amount of tier 1 capital required would substantially exceed what is currently demanded, assuming that both ratios are set at the same level.

Under the new capital rule, banks subject to the supplementary leverage ratio requirement are required to calculate and report their supplementary leverage ratios beginning in the first quarter of 2015. The new minimum requirement, however, does not apply until 2018.

The agencies also propose further increasing capital requirements for the largest, most systemically significant U.S. banks.

Regulators could require the federally insured depository institutions of covered bank holding companies to meet a 6 percent supplementary leverage ratio to be considered “well capitalized.” The rule would apply to any bank holding company with more than $700 billion in consolidated total assets or $10 trillion in assets under custody, and any FDIC insured subsidiary. Using these asset thresholds, the NPR would currently apply to the eight largest U.S. banking organizations: Citigroup, JPMorgan Chase, Bank of America, Bank of New York Mellon Corporation, Goldman Sachs, Morgan Stanley; State Street, and Wells Fargo.

The regulators have also proposed a new leverage buffer for covered bank holding companies. It would require them to maintain at least 2 percentage points above the minimum supplementary leverage ratio requirement of 3 percent, for a total of 5 percent. Failure to maintain this buffer would result in limitations on dividend distributions and discretionary bonus payments. This proposal, if adopted, will take effect on Jan. 1, 2018.

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