[WASHINGTON] The US Federal Reserve (Fed) announced on Wednesday it was temporarily easing its leverage rules for large banks by exempting certain investments from a key leverage calculation, part of the effort to combat the economic slowdown inflicted by the coronavirus pandemic. Read more at The Business Times.
The US Federal Reserve announced on Wednesday it was temporarily easing its leverage rules for large banks by exempting certain investments from a key leverage calculation, part of the effort to combat the economic slowdown inflicted by the coronavirus pandemic.
Now, banks will be able to exempt any holdings in US Treasury debt or deposits at the Fed from their calculations of the supplementary leverage ratio, or SLR, an additional leverage restriction imposed on the largest US banks. The exemptions, which the Fed said will help ease strains in the Treasury market and encourage banks to continue lending, will stay in place until March 31, 2021.
The leverage restrictions easing marks the latest attempt by the Fed to ensure that banks can continue to lend during the slowdown due to the pandemic. The SLR, which applies to banks with over US$250 billion in assets, was created by the US central bank following the 2007-2009 financial crisis that saw banks nearly collapse after a national housing crisis. The rule, which directs banks to hold a certain percentage of capital as a cushion against its assets, was aimed at ensuring the largest institutions had an extra layer of protection against any future downturns.
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