U.S. banking regulators have unveiled a proposal to ease capital requirements on large financial institutions in an effort to bolster liquidity in the Treasury market, which has shown signs of strain in recent months.
The proposal targets the enhanced supplementary leverage ratio (eSLR)—a post-2008 financial crisis safeguard that requires the largest banks to hold a set percentage of capital against all assets, including low-risk ones like U.S. Treasuries. Under the revised rule, banks would be permitted to temporarily exclude certain high-quality assets, such as Treasuries and central bank reserves, from the calculation. As reported by the Financial Times, the goal is to reduce disincentives for banks to act as intermediaries in the U.S. government bond market, especially during periods of stress.
