US set to cut capital requirements for banks, FT reports

U.S. authorities are preparing to announce one of the biggest cuts in banks’ capital requirements in over a decade, the Financial Times reported on Thursday.

Regulators were in the next few months poised to reduce the supplementary leverage ratio (SLR), the newspaper reported, citing several people familiar with the matter.

The supplementary leverage ratio is a rule that requires big U.S. banks to keep an extra layer of loss-absorbing capital.

The U.S. banking industry is optimistic that regulators will soon move to change how much capital they set aside against typically safe investments, particularly after the turmoil in Treasury markets last month.

A move to revamp the SLR could reduce the amount of cash banks must reserve, freeing them up for more lending or other activities, and could incentivize banks to play a larger role in intermediating Treasury markets.

U.S. regulators have flagged the SLR as meriting reconsideration and are mulling whether to tweak the rule’s formula to reduce big banks’ burdens or provide relief for extremely safe investments, like Treasuries.

The Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation declined to comment to FT.

They did not immediately respond to Reuters requests for comment.

Source : Reuters