Wall Street Banks Face Eased Leverage Rules Under U.S. Proposal

• April 11 2018
• Jesse Hamilton

U.S. banking regulators are poised to ease leverage limits for Wall Street lenders, the latest move to relax post-crisis financial rules that the Trump administration blames for stifling economic growth.

U.S. banking regulators are poised to ease leverage limits for Wall Street lenders, the latest move to relax post-crisis financial rules that the Trump administration blames for stifling economic growth.

In its second significant proposal this week, the Federal Reserve -- along with the Office of the Comptroller of the Currency -- said it wants to scrap an existing method for measuring each bank’s borrowing and instead tailor limits to the risks posed by specific firms.

The proposal “would further tailor leverage ratio requirements to the business activities and risk profiles of the largest domestic firms,” the agencies said in a statement.

Central bank and OCC staffers have been working for months to better align the leverage-ratio rule -- a requirement that U.S. banks maintain a minimum level of capital against all their assets -- with a recent global agreement at the Basel Committee on Banking Supervision. The effort has drawn opposition from the Federal Deposit Insurance Corp., which is still led by a Barack Obama appointee, people familiar with the matter have said.

The regulators have also had to contend with a parallel effort from Congress that would revamp how the rule handles certain companies known as custody banks.

The Fed’s vote was 2-to-1, with Governor Lael Brainard opposing the proposal. On Tuesday, the agency proposed an overhaul of its risk-based capital rules to better align them with its annual stress tests of banks -- and to tailor capital demands to each bank’s business.