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Banks Press Fed to Preserve $600 Billion in Balance-Sheet Leeway

  • Leverage ratio capital break is set to expire March 31
  • JPMorgan says it may shun deposits if tough rule reinstated
The Marriner S. Eccles Federal Reserve building in Washington, D.C.

The Marriner S. Eccles Federal Reserve building in Washington, D.C.

Photographer: Samuel Corum/Bloomberg
Updated on

Thanks to the pandemic, U.S. banks won a long-sought regulatory break that let them expand their balance sheets by as much as $600 billion without adhering to profit-denting safeguards. Now, firms are frantically lobbying to extend that relief before it expires at month’s end.

The reprieve from what’s known as the supplementary leverage ratio -- granted a year ago as Covid-19 rocked markets and the economy -- gave lenders free rein to load up on Treasuries and deposits, while avoiding a requirement that they hold more capital as a buffer against losses. The Federal Reserve and other agencies eased the rules because they said they wanted excess capital deployed to struggling businesses and households.