Capital
Supplementary Leverage Ratio
Also known as SLR
The Supplementary Leverage Ratio (SLR) measures Tier 1 capital against total leverage exposure, including off-balance-sheet items. It applies only to the largest US banks under Basel III as a non-risk-weighted backstop.
How is SLR calculated?
Total Leverage Exposure includes on-balance-sheet assets plus off-balance-sheet items: derivative contracts (potential future exposure), securities financing transactions (repos and securities loans), and undrawn loan commitments. This is a much broader denominator than the Tier 1 leverage ratio.
Why does SLR matter?
The SLR was designed to prevent the kind of off-balance-sheet leverage that amplified the 2008 crisis. G-SIBs face an enhanced SLR (eSLR). Under the final rule effective April 1, 2026, a G-SIB holding company needs the 3% minimum plus a buffer equal to half its method 1 G-SIB surcharge, and each insured depository subsidiary needs 3% plus the lesser of 1% or half the parent's method 1 surcharge. Before that rule the standards were a fixed 5% at the holding company and 6% at the bank. The rule constrains how much risk-free Treasury inventory the largest banks can hold, which has implications for Treasury market liquidity. The Federal Reserve, the OCC and the FDIC issued the 2026 recalibration jointly, citing Treasury market intermediation: a leverage ratio that binds before the risk-based capital requirements discourages the largest, systemically important banks from holding Treasury securities, so the SLR is meant to be a backstop with a capital buffer rather than the constraint that decides a balance sheet.
How do you interpret SLR?
Most large US banks operate with SLRs between 5.5% and 6.5%. Since the April 2026 recalibration, each G-SIB's eSLR requirement depends on its method 1 surcharge, so the binding level differs by firm; banks typically plan to stay 50-100 bps above it. The SLR became briefly newsworthy in 2020 when regulators temporarily excluded Treasuries and central bank reserves to facilitate pandemic-era Treasury market functioning.
What is a good SLR?
| Range | Label | Interpretation |
|---|---|---|
| ≥ 6% | Strong | Comfortable cushion over the 3% minimum and the eSLR requirements. |
| 5–6% | Adequate | Above the recalibrated eSLR requirements (3% plus half the firm's method 1 surcharge). |
| 3–5% | Watch | Above the standard 3% minimum; whether it meets the eSLR depends on the firm's buffer. |
| < 3% | Concern | Below the standard SLR minimum. |
Worked example
Frequently asked
Which banks must report the SLR?
Category I, II and III banking organizations: generally those with $250 billion or more in assets, or $100 billion or more with $75 billion or more in certain risk indicators. Category I and II firms are the advanced approaches institutions. Smaller banks do not compute or report the SLR.
What is the enhanced SLR (eSLR)?
An additional leverage buffer for the eight US G-SIBs and their insured depository subsidiaries. Since April 1, 2026 (optional from January 1, 2026), the holding company buffer equals half the firm's method 1 G-SIB surcharge, and the depository subsidiary buffer is the lesser of 1% or half the parent's method 1 surcharge, both on top of the 3% minimum; the eSLR is no longer part of the well-capitalized test. Before then it was a fixed 5% at the holding company and 6% at the bank.
Why was the SLR controversial in 2020?
When pandemic-era reserves ballooned bank balance sheets, the SLR's denominator grew faster than risk-weighted assets, threatening to bind on safe assets like Treasuries. Regulators temporarily excluded Treasuries and reserves from the denominator to ease market dysfunction.
Sources
- 12 CFR §217.10: Federal Reserve Regulation Q supplementary leverage ratio
- Pillar 3 capital disclosures (large bank quarterly filings)
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