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.
Formula
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 it matters
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) of 5% at the holding-company level and 6% at the insured depository subsidiary. The rule constrains how much risk-free Treasury inventory the largest banks can hold, which has implications for Treasury market liquidity.
How to interpret
Most large US banks operate with SLRs between 5.5% and 6.5%. The eSLR's 5% holding-company floor is the binding constraint during stress; banks 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.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 6% | Strong | Comfortable buffer above eSLR floor. |
| 5–6% | Adequate | Meets G-SIB eSLR minimum. |
| 3–5% | Watch | Above standard 3% minimum; below eSLR. |
| < 3% | Concern | Below the standard SLR minimum. |
Worked example
Frequently asked
Which banks must report the SLR?
Category I, II, and III banks (advanced approaches institutions, roughly $250B+ in assets). Smaller banks do not compute or report the SLR.
What is the enhanced SLR (eSLR)?
An additional buffer that applies to the eight US G-SIBs. The eSLR is 5% at the bank holding company and 6% at the insured depository subsidiary.
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)
See SLR across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by SLR, refreshed quarterly within 48 hours of FFIEC release.