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yesterday

Fed Considers Cutting Enhanced Supplementary Leverage Ratio for Major Banks

Critics warn that cutting the requirement to as low as 3.5 percent could fuel bond market activity at the expense of system resilience.

An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo
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Overview

  • Fed officials will meet on June 25 to consider lowering the eSLR from 5 percent to a range of 3.5–4.5 percent to ease constraints on Treasury trading and lending.
  • Senator Elizabeth Warren sent letters to Fed, FDIC and OCC leaders arguing that the rollback would weaken a critical post-2008 safeguard and heighten economic risks.
  • The FDIC submitted a draft rule to the Office of Information and Regulatory Affairs proposing revisions to banks’ supplementary leverage capital requirements.
  • Treasury Secretary Scott Bessent and Fed Vice Chair for Supervision Michelle Bowman have endorsed a full review of the leverage ratio, including possible exemptions for short-duration Treasuries.
  • Opponents contend that thinner capital buffers would allow megabanks to favor dividends and buybacks over loss absorption, increasing systemic vulnerability.