The U.S. banking sector is advocating for changes to the Supplementary Leverage Ratio (SLR), a regulation that requires banks to hold capital against all assets, including low-risk ones like U.S. Treasury securities. Industry leaders argue that the current SLR framework is outdated and limits banks’ ability to lend and support the Treasury market, which has experienced significant volatility in recent months.
The proposed reforms include exempting Treasury securities and central bank deposits from the SLR, or modifying the “enhanced” SLR for large banks. These changes aim to boost liquidity in the $29 trillion Treasury market, which saw significant disruptions, including a selloff in April 2025. By easing these rules, proponents believe banks could be more flexible in deploying capital, supporting economic growth, and enhancing market stability.
Regulatory bodies, including the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency, are currently considering these reforms. Treasury Secretary Scott Bessent has emphasised the importance of these changes, with Federal Reserve Chair Jerome Powell signalling that it may be time to revisit the rule.
The push for easing SLR requirements aligns with broader deregulatory efforts, particularly those under the Trump administration, aimed at reshaping financial regulations to foster growth. If approved, these changes could strengthen the Treasury market and increase investor confidence, potentially benefiting the overall financial system.
