Overview

• The Fed will hold an open meeting on June 25 to discuss proposed adjustments to the supplementary leverage ratio for large banks.
• Fed Vice Chair Michelle Bowman called the leverage rules “distorted” and said the SLR overhaul is a first step in a wider capital requirements review.
• Rapid growth in Treasuries and reserves has made the SLR the binding constraint, limiting banks’ ability to facilitate Treasury market trades.
• Bowman cautioned that an overly rigid SLR can encourage banks to take on higher-risk assets since safer holdings offer no capital discount.
• The Fed is considering indexing the global systemically important bank surcharge and key asset thresholds to economic growth to prevent stricter rules as banks expand.