Ending leverage ratio relief could force US banks to downsize

Louie Woodall
09 Feb 2021

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The removal of a carve-out of US Treasuries and excess reserves from the calculation of the supplementary leverage ratio could force large US banks to slash their exposures, industry sources warn. This, in turn, could sap liquidity from repo lending, a cornerstone of money markets.

The Federal Reserve ordered the exemption last April to ease leverage capital charges caused by ballooning excess reserves and increased market-making in US Treasuries at top banks. It is due to expire on March 31

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