Banking sector pushing for changes in leverage rules to boost Treasury market liquidity

From Yahoo Finance: 2025-05-13 06:06:00

The banking industry is hopeful for a change in capital requirements, such as the supplementary leverage ratio, to free up cash for lending and incentivize banks to participate in Treasury markets. Regulators are considering a revamp, with industry groups pushing for reform due to constraints on bank lending.

Options being debated include exempting Treasury bonds from calculations or refining the formula for the enhanced supplementary leverage ratio. The largest banks, most active in the Treasury market, would benefit directly. Industry sources believe tweaking the ratio is a more likely option. Banks also hope for broader capital requirement overhauls.

Bank executives support SLR reform, arguing it doesn’t make sense to hold capital against riskless assets. Proponents of the SLR see it as critical for risk management, but relief could provide more liquidity to Treasury markets, which faced a selloff in April. Market expectations for reform have impacted swap rates.

Read more: Analysis-Banking sector says easing of US leverage rules could support Treasury market