Banks fear time-limit on Fed leverage ratio reprieve
Capital constraints not covered by relief also weigh on balance sheet strategy
The Federal Reserve estimates the temporary removal of US Treasuries and central bank reserves from the calculation of the supplementary leverage ratio will free up a staggering $1.6 trillion in extra bank leverage exposure.
But banks say they are reluctant to commit that extra balance sheet, due to a one-year time limit on the exemption and other capital constraints that remain in place because of gaps in the relief provided.
“Most firms are still dealing with a number of issues in terms of
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