The Chairs and Ranking Members of the Financial Institutions and Capital Markets Subcommittees push reform that will lower borrowing costs, enhance Treasury Market stability
Washington, D.C.— Today, U.S. Congressman Andy Barr (R-KY) led a bipartisan group of four senior lawmakers on the House Financial Services Committee pushing for reform at the Federal Reserve and Office of Comptroller of the Currency (OCC) of leverage rules. U.S. Congresswoman Ann Wagner (R-MO), U.S. Congressmen Brad Sherman (D-CA) and Bill Foster (D-IL) joined Barr on the letter to Federal Reserve Chairman Jerome Powell and Acting OCC Rodney Hood. Key excerpts from the letter are below and you can read the full letter here:
“Leverage requirements have not been updated since their inception and have, at times, become a binding constraint for large intermediaries of the U.S. Treasury market,” the lawmakers wrote. “We write to gain a better understanding of how and when the Federal Reserve plans to adjust leverage requirements to improve Treasury market functionality.”
“The market for U.S. Treasury securities is the world’s most important financial market,” the lawmakers continued. “The health and liquidity of the U.S. Treasury market has a direct effect on borrowing costs for the U.S. government. Given your comments during your appearance before the House Financial Services Committee and previous efforts by the Federal Reserve to modify leverage ratio requirements, we respectfully request responses to the following questions:
- What options are the Federal Reserve considering to address the Supplementary Leverage Ratio (SLR), Enhanced Supplementary Leverage Ratio (eSLR), and Tier One Leverage Ratio (T1L)?
- How would the adjustments to the leverage ratios that are under consideration, particularly with respect to U.S. Treasury Securities, affect Treasury market liquidity and stability?
- In addition to adjustments to the leverage ratios, what options are the Federal Reserve considering to increase resilience of the Treasury market and how will those options interact with policy changes put forward by other relevant regulatory bodies, including the Treasury Department and Securities and Exchange Commission?
- Does the Federal Reserve have a timeline for proposing such changes? Do you have a timeframe and goal for completion?”
Lawmakers requested response from the regulators by Thursday, June 26th. You can read the full letter here.