Yellen Gives on Leverage Ratio, Stands Firm on CCAR
Today’s Senate Banking session did not repeat the strong calls from FinServ GOP leadership yesterday to ban IOER and immediately reduce the balance sheet. Instead, the session focused on broader monetary-policy and regulatory concerns. This gave Chair Yellen the chance to make more clear today that the FRB is indeed moving forward on Gov. Powell’s recommendation to remove central-bank reserves from the leverage ratio (LR) denominator. Gov. Powell has also suggested that the GSIB surcharge would soon be incorporated in stress testing; Ms. Yellen said that this is indeed in the works even as she stressed the need for tough, opaque stress testing. As in the past, the FRB Chair agreed that the $50 billion threshold is too low, that community banks need relief, and that Volcker is too complex.