MNI BRIEF: Fed's SLR Proposals Won't Weaken Capital Positions

Federal Reserve Board General Counsel Mark Van Der Weide said Thursday the central bank will spend considerable time this year to make adjustments to its supplementary leverage ratio, emphasizing that changes will not diminish strong capital positions for large banks.

"Fundamentally we think we need to explore some potential longer term adaptations to the SLR to help assure that it's still going to be a backstop to risk based capital requirements in the new high reserves environment that we are now entering," he said in remarks at an Institute of International Finance event, without divulging when proposal could come. "I do want to emphasize that our work on the leverage ratio is not going to do anything to erode the strong capital positions for large US banks."

The Fed last week said it would allow SLR relief to expire at the end of the month and seek comment on longer run adjustments to SLR. Research from the New York Fed has since said the SLR was not a binding constraint on dealer intermediation in March 2020, though Chair Jerome Powell said earlier this week that SLR is "rapidly becoming" a binding constraint due to increased reserves and Treasuries.