6 days ago
Fed's Bowman: Time Has Come to Revisit Leveraged Ratios
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Thank regulatory requirements, specifically leverage ratios in the United States can have unintended consequences. This can often lead to broader impacts, including market impacts like those observed in Treasury market intermediation activities. Once we've identified emerging unintended consequences or issues that were not contemplated during the development of a new regulatory approach, we must consider how to revisit earlier regulatory and policy decisions. As I'll discuss in greater detail shortly. Regulators must act quickly to address the growing problems with increasingly binding leverage ratios in 2021 in connection with the expiration of temporary emergency changes to the supplemental leverage ratio or the SLR, the Federal Reserve committed to soon inviting public comment on potential modifications. Over four years later, a proposal has not been issued and problems with Treasury market intermediation continue to emerge. The time has come for the federal banking agencies to revisit leverage ratios and their impacts on Treasury markets.
