Federal Reserve plan to relax leverage rules could give big US banks $6 trillion boost

From Yahoo Finance: 2025-06-26 09:57:00

Large U.S. global banks could see $6 trillion in balance sheet capacity under a Federal Reserve proposal to relax leverage rules, boosting Treasury market participation. Shares of major banks rose, with JPMorgan Chase up 1.3% and Goldman Sachs up 1.6%. The plan, approved by a 5-2 Fed vote, is the first of potential deregulatory moves led by Michelle Bowman.

The proposal aims to reform the “enhanced supplementary leverage ratio” to tie capital requirements to a bank’s global financial system role. Analysts anticipate $185 billion in freed-up capital for banks. Goldman Sachs analysts predict the rule change could release up to $5.5 trillion in bank balance sheets, improving market liquidity.

The supplementary leverage ratio currently requires banks to hold capital against all assets equally, potentially discouraging banks from holding low-risk U.S. Treasuries. Fed officials believe the changes are necessary to fix a rule that occasionally restricts bank activity, especially as government debt has increased. Barclays analysts support the proposal, saying it allows banks to expand balance sheets in low-risk assets with sufficient return.

Read more: Wall Street forecasts windfall for big US banks from Fed plan to ease leverage rule