Fed Eases Leverage Ratio, Impacting Major U.S. Banks

The Federal Reserve has proposed easing the enhanced Supplementary Leverage Ratio (SLR) requirement for major U.S. banks, including JPMorgan Chase and Bank of America, potentially releasing $185 billion capital.

Market analysts suggest changes could free $185 billion for banks, enhancing liquidity while potentially affecting other financial markets like Treasuries.

The proposal led by Fed officials, including Michelle Bowman and Jerome Powell, aims to reform capital rules. JPMorgan Chase and other banks could receive a capital windfall of about $185 billion. Michelle Bowman emphasized the necessity for adjusting “distorted” capital requirements, offering a long-overdue reform. Involved banks include JPMorgan Chase, Goldman Sachs, and others. Jerome Powell stated it addresses banks holding more low-risk assets, making existing rules operational constraints.

“When the leverage ratio becomes the primary constraint, rather than risk-based measures, it creates perverse incentives that actually undermine the stability of vital markets like U.S. Treasuries.” — Jerome Powell, Chairman, Federal Reserve

Banks’ stocks rose by 1–1.6%, with S&P 500 Banks Index up 1.4%, boosting market sentiment. Experts believe it could indirectly affect high-cap cryptocurrencies by improving broader market liquidity. The proposal might enhance banks’ roles in the Treasury market, indirectly influencing interest in digital assets. While targeted toward traditional banks, potential liquidity expansions could affect cryptocurrencies like BTC and ETH.

Fed’s action reflects historic patterns seen post-2008, aimed at stabilizing markets. Past SLR adjustments often led to banks increasing capital allocations in government securities. Analysts believe further capital proposals during Bowman’s leadership might follow, shaping broader financial dynamics.

While direct cryptocurrency impacts are unclear, the proposal’s secondary effects could stimulate market interest.