Treasury: SLR 'reducing stability' in US repo markets

Treasury study found leverage ratio is making bank repo funding “fragile”

Fragile wall
Stability of BHC-affiliated broker-dealers’ repo funding may be reduced, says OFR

US repo markets have altered drastically since the proposal of the supplementary leverage ratio (SLR) in 2012, leaving banks that rely on tri-party repo funding more “fragile” and vulnerable to market shocks, according to a startling analysis by the US Treasury.

“The leverage ratio has reduced leverage – which was an intended effect – but we now have some more price-volatile collateral backing bank holding company (BHC) repo, and this is not the kind of collateral that could go into a general

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