MNI BRIEF: SLR Did Not Constrain Dealer Intermediation: NY Fed

The supplementary leverage ratio was not a binding constraint on dealer intermediation in March 2020, when Treasury market liquidity dried up at the start of the Covid-19 pandemic, according to new research out of the New York Fed.

Most dealers not subject to SLR, which requires the largest banks to hold a minimum ratio of 3% of tier 1 capital to total on- and off-balance sheet exposures, did not expand their long and short positions and, in many cases, reduced them, the researchers found.

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.