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Following the Federal Reserve’s decision to provide temporary supplementary leverage ratio (SLR) relief for large bank holding companies, all of the federal banking agencies have done the same for insured depository institutions (IDIs), providing even greater relief for GSIBs subject to the enhanced supplementary leverage ratio (eSLR) set at six percent for IDIs.  Under the IFR, reserves held at the Fed and direct Treasury obligations do not count in the SLR denominator, significant relief given that these assets are already exempt from any risk-based capital charge.

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During today’s Senate Banking hearing with FRB Chairman Powell and Treasury Secretary Mnuchin, it became still more clear that Members of Congress want expansive economic aid but differ by party, state, and political philosophy on who should get it how.  Sticking to generalities wherever possible, Mr. Mnuchin promised to deploy all CARES Act lending funds (see FSM Report RESCUE72) once there is a better understanding of which facilities need them.  He also emphasized that Treasury is willing to risk losses on its commitments.  Chairman Crapo (R-ID) pressed for quick and expansive Fed facilities, especially for rural municipalities; Ranking Member Brown (D-OH) and Sen. Warren (D-MA) want facilities targeted to workers with new certification requirements added to ensure corporate accountability.  Facing bipartisan demands for facility expansion, Mr. Powell committed to adjusting the Main Street Lending Program if participation is low and reviewing the Municipal Liquidity Facility to ensure broader access in rural states.

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…