Fed Proposes Easing Capital Requirements for Major Banks

Core Viewpoint - The Federal Reserve has proposed easing the enhanced Supplementary Leverage Ratio (SLR) to significantly reduce capital requirements for major U.S. banks, including JPMorgan Chase, Bank of America, Goldman Sachs, and Morgan Stanley, potentially freeing billions in capital currently tied up due to post-2008 leverage requirements [1][6]. Group 1: Proposed Plan Details - The Fed's proposal aims to lower capital requirements for Global Systemically Important Banks (GSIBs) by 1.4%, equating to $13 billion, and reduce capital requirements for their depository institution subsidiaries by 27%, or $213 billion [2]. - The new rule will replace the current 2% enhanced SLR buffer with a buffer equal to half of each bank's GSIB surcharge, and similarly adjust the 3% ESLR buffer for global bank subsidiaries [3]. Group 2: Impact on Banks - The easing of capital requirements is expected to directly benefit major banks by reducing the amount of capital they must hold in reserve, providing them with more flexibility to expand operations, particularly in lending and Treasury trading [4]. - The proposed plan could also support Treasury trading during market stress while maintaining adequate capital for financial stability, potentially enhancing bank profitability by freeing funds for investment or business expansion [5].