Fed announces changes to leverage rules

The United States Federal Reserve Board (Fed) announced that the temporary change to its supplementary leverage ratio (SLR) for US banks will expire on March 31st, as scheduled.

In a statement, the Central Bank rejected extending the rule, implemented in April of last year to encourage bank loans in the pandemic context, which excluded United States Treasury securities and the entity’s reserves from this ratio, with the aim of easing tensions in the Treasury market as a result of the pandemic.

The institution led by Jerome Powell understands that since the rule came into force “the Treasury market has stabilized.”

However, the US body indicated that following the recent increase in the supply of Central Bank reserves and the issuance of Treasury securities, the board will have to address the current design and caliber of the SLR to prevent tensions that may limit economic growth and undermine financial stability.

Thus, the Fed noted that to ensure that the SLR, implemented in 2014 as an additional capital requirement, remains effective in an environment of higher reserves several potential indicator modifications will soon be brought to the public eye.

“The proposal and comments will contribute to ongoing discussions with the Treasury Department and other regulators on future work to ensure the resilience of the Treasury market,” they said.

K. Tovar

Source: dpa