The leverage-ratio rule under review by US regulators
(11 April 2018 – Global) The Federal Reserve and the Office of the Comptroller of the Currency want to ease leverage limits for Wall Street banks in the latest move to relax post-crisis financial rules that the current administration blames for stifling growth.
The move would scrap the existing method for measuring each bank’s borrowing limits and instead tailor restrictions to the risks posed by specific firms, potentially freeing up tens of billions of dollars for lending and other business activities.
The agencies said the amount of capital that lenders are required to maintain in their main subsidiaries might fall by a whopping US$121bn if the change goes through.
The Federal Deposit Insurance Corp., did not join the Federal Reserve and the OCC in issuing the proposed rule and has voiced opposition saying the leverage ratio rule was “among the most important post-crisis reforms.”
The Federal Reserve has also proposed an overhaul of its risk-based capital rules to better align them with its annual stress tests of banks and to tailor capital demand to each bank’s business.