Ah, the US government, ever the harbinger of “stability.” This time, they’re reportedly getting ready to announce a magnificent rollback in banking regulations. Looser capital requirements for financial institutions? What a delightful thought! No one ever gets hurt by banks having more room to, well, “breathe,” right?
In a move that could only be described as *bold*, President Trump’s administration is gearing up to reduce the supplementary leverage ratio (SLR) for US banks’ capital reserves. Of course, they’re doing this to make sure the financial institutions aren’t held back by pesky regulations. Who needs those when there’s so much money to be made?
Originally, the current SLR rules were introduced back in 2014, following the *slightly* unforgettable Global Financial Crisis of 2008-2009. You know, that minor event that almost brought down the world’s economy. But some people believe these regulations are, quite frankly, just *too much* and, well, they might just be holding back the market. Really, who could have predicted that too much regulation might stifle growth? Oh wait…
Greg Baer, head of the Bank Policy Institute lobby group, ever the optimist, claims,
“Penalizing banks for holding low-risk assets like Treasuries undermines their ability to support market liquidity during times of stress when it is most needed… Regulators should act now rather than waiting for the next event.”
Ah yes, Greg. We really should’ve figured out that relaxing regulations will totally help the banks provide liquidity… unless it doesn’t. We’ll find out soon enough, I’m sure. 🙄
But wait, there’s more! Federal Reserve Chair Jerome Powell, earlier this year, boldly declared that dialing back the SLR would “strongly” help support the US Treasury market. Well, Jerome, I’m sure the Treasury market could use all the help it can get – maybe this is just the thing! Perhaps a bit of chaos in the financial system will really spice things up.
“We need to work on Treasury market structure, and part of that answer can be, and I think will be, reducing the calibration of the supplemental leverage ratio.”
On the other hand, Nicolas Véron, from the Peterson Institute for International Economics, has a slightly different view. He feels that the current risks for US banks, the ever-wobbly direction of the dollar, and the fragile state of the economy might suggest now is not exactly the best time to loosen up those standards. But hey, what does he know, right? 🙄
Under the Basel III regulations, which have been the golden standard since the crash (and let’s face it, we’ve all learned so much since then, haven’t we?), systemically important banks (SIBs) in the United States are required to keep a supplementary leverage ratio (SLR) of at least 5% or more at the holding company level. Meanwhile, other countries have a slightly more relaxed 3% requirement. The world’s a big place, after all.
So, FT’s sources say they didn’t specify exactly what SLR percentage regulators are aiming for, but the lobbyists (bless their hearts) are dreaming of bringing America’s rules in line with those international standards. Because, you know, who needs more stringent rules when we can all just *wait for the next financial catastrophe* to really shake things up?
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2025-05-19 15:01