FILE PHOTO: A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar/File Photo
NEW YORK, June 25 (Reuters Breakingviews) – With apologies to Archimedes, give banks enough leverage and they shall move the world of U.S. Treasury bonds. The Federal Reserve and other regulators are debating whether and how to relax capital requirements so the country’s biggest lenders can be more active in the government debt market. The two leading options are subpar, but there’s a third way.
At issue is the so-called Supplementary Leverage Ratio, or SLR, a 2010 provision to ensure mega-banks have an extra capital cushion against falling asset values. Curbing investment in the name of systemic safety is now considered to be hurting trade in U.S. bonds. Treasury Secretary Scott Bessent in March pressed for the rules to be revisited.
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April provided a timely reminder….
