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Investing.com -- The U.S. Federal Reserve has proposed changes to ease the Enhanced Supplementary Leverage Ratio for large banks, potentially reducing capital requirements significantly.
The proposal would cut aggregate Tier 1 capital requirements for Global Systemically Important Banks by 1.4% or $13 billion. More substantially, it would reduce capital requirements for depository institution subsidiaries of global banks by 27% or $213 billion.
Under the new rules, the Fed would replace the current 2% ESLR buffer with a buffer equal to half of each bank’s GSIB surcharge. Similarly, the 3% ESLR buffer for global bank subsidiaries would be replaced with half of each bank’s GSIB surcharge.
Fed Chair Jerome Powell stated that reconsidering the rule is prudent "given the stark increase in level of relatively safe assets on bank balance sheets."
Fed Vice Chair Michelle Bowman expressed support for the changes, noting they would "build resilience in U.S. Treasury markets" and "reduce market dysfunction."
Not all Fed officials agree with the proposed changes. Fed Governors Michael Barr and Adriana Kugler plan to oppose the modifications, according to their prepared statements.