SIFMA released the following statement from Kenneth E. Bentsen, Jr., SIFMA president and CEO, on the proposal released today reforming supplemental leverage ratio (SLR) rules:
“We commend the Agencies for recognizing the need to address the constraints created by leverage ratio requirements on large banks, impacting their ability to intermediate the U.S. Treasury market and in turn negatively impacts Treasury market liquidity.
“Bank-affiliated brokers-dealers are key intermediaries in the U.S. Treasury market. Current capital rules require banks to meet two leverage ratios – supplementary leverage ratio and U.S. Tier 1 leverage ratio. Leverage ratios, being non-risk-sensitive, disincentivize large banking organizations from holding and intermediating safe assets, such as central bank reserves and U.S. Treasury securities. With U.S. Treasury issuance set to grow rapidly, and with volatility in the market top of mind, lowering the supplementary leverage ratio buffer requirement does not address the disincentives that large banking organizations face. Thus, we encourage the Agencies to exempt Treasuries and central bank deposits from leverage ratio calculations going forward. This will ensure banks can effectively intermediate the Treasury market and have greater resources to support U.S. economic growth.”
In April, SIFMA submitted letters to relevant regulators further expanding on these views, which can he found here.
