Us Regulators Consider Easing Leverage Rules for Banks

U.S. regulators are considering easing leverage rules for banks, potentially freeing up capital for lending. The move follows recent turmoil in Treasury markets. It could incentivize banks to play a larger role in intermediating Treasury markets. Treasury Secretary Scott Bessent has identified the overhaul of the supplementary leverage ratio (SLR) as a high priority. Banks argue that the current SLR, established after the 2007-2009 financial crisis, constrains lending. They believe it requires them to hold capital against even very safe assets. Regulators are considering exempting Treasury bonds and central bank deposits from SLR calculations. Another option involves tweaking the "enhanced" SLR formula. This would result in a lower ratio. The largest banks, prominent Treasury market participants, would benefit most directly from this change.