Powell Says Fed Working on Permanent Fix to SLR Ratio

Q: Is the Fed thinking about a permanent fix to the SLR ratio?

• A: We are working on it - don't have anything to share with you in terms of the particulars or timing right now, unfortunately. But our position has been for a long time and is now that we like to leverage ratio to be a backstop to risk based capital requirements.
• When leverage requirements are binding it does skew incentives for firms to substitute risks. The SLR is ceasing to be the intended backstop for our big firms that we want it to be. We think it's appropriate to consider ways to adapt it to this new high reserves environment and we are looking hard at the issue. We will take whatever actions are necessary to assure that any changes we do make or recommend do not erode the overall strength of bank capital requirements.