Overview

• The Fed will convene on June 25 in its first meeting since Fed Governor Michelle Bowman’s confirmation as the top regulatory official to consider easing leverage rules.
• Officials aim to lower the enhanced supplementary leverage ratio from 5% to between 3.5% and 4.5% for bank holding companies and their top-tier subsidiaries.
• Regulators argue that the current rule has constrained banks’ capacity to trade in the $29 trillion US Treasury market and weighed on lending.
• The proposal may include a public comment period on exempting US Treasury securities from the ratio calculation.
• Critics note that when Treasuries were previously excluded in 2020, banks did not significantly increase trading and instead directed capacity toward dividends and buybacks.