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Treasury wants to weaken a crucial post-crisis capital requirement
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Treasury wants to weaken a crucial post-crisis capital requirement

Author Gregg Gelzinis unpacks the Treasury Department proposal that would allow large banks to exclude certain assets in calculating the leverage ratio.

Authors

  • Gregg Gelzinis

A proposal by the Treasury Department that would allow large banks to exclude certain assets in calculating the leverage ratio is not only a misguided recommendation that would undermine post-crisis capital requirements for Wall Street. The recommendation also appears to be in direct contradiction with the leverage ratio principles outlined in the Treasury report’s own appendices.

On June 12, the Treasury released the first in a series of financial regulatory reports in accordance with an executive order signed by President Trump in February. Among the report’s worrisome recommendations is to modify the denominator in the Supplementary Leverage Ratio, or SLR. Specifically, Treasury recommends removing certain assets —cash held at central banks, U.S. Treasury securities and initial margin for centrally cleared derivatives—from what top-tier holding companies must include in maintaining a 5% SLR. This essentially makes it easier to meet the SLR requirement.

The above excerpt was originally published in American Banker. Click here to view the full article.

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Authors

Gregg Gelzinis

Associate Director