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U.S. Regulators Move to Ease Capital Rules, Boost Banks’ Treasury Holdings

U.S. Regulators Move to Ease Capital Rules, Boost Banks’ Treasury Holdings. Source: Almonroth, CC BY-SA 3.0, via Wikimedia Commons

U.S. financial regulators have reached an agreement to relax key capital requirements for major banks, a move expected to encourage greater holdings of U.S. Treasuries, according to a Bloomberg News report. The Federal Reserve and other agencies have reportedly submitted their final proposal for revising the enhanced supplementary leverage ratio (eSLR) to the White House for review, signaling the final stage before implementation.

The eSLR currently requires large banks to hold equal levels of capital against all assets, including low-risk government securities such as U.S. Treasuries. Critics have long argued that this rule discourages banks from participating in Treasury markets and reduces their ability to facilitate trading in safe assets crucial to financial stability.

Under the proposed changes, the amount of capital required would be adjusted based on a bank’s global systemic importance—essentially linking capital buffers to how much risk each firm poses to the overall financial system. Regulators believe this approach will more accurately reflect risk exposure while strengthening market liquidity.

The reform marks a major step toward easing post-crisis regulations that banks claim have limited their efficiency and profitability. The banking industry has lobbied for relief for years, contending that the current framework needlessly constrains their balance sheets and discourages investment in government debt.

Officials are reportedly targeting to finalize and adopt the new rule within weeks, pending White House approval. If enacted, the measure would represent a significant policy win for Federal Reserve Vice Chair for Supervision Michelle Bowman, who has advocated for a more flexible and growth-oriented regulatory framework.

The Federal Reserve declined to comment on the development, while the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have not yet responded to requests for comment.

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