U.S. banking regulators have given final approval to relaxed leverage rules that reduce capital constraints on the country’s largest banks. The change is part of a targeted deregulatory push designed to free up capital and encourage low-risk intermediation in critical markets — particularly U.S. Treasuries.

Why the Change Matters

At the center of the reform is the enhanced supplementary leverage ratio (eSLR) — a post‑crisis rule that required global systemically important banks (GSIBs) to hold extra capital, even for low-risk assets like Treasury securities. Under the new regime, banks will no longer be bound by a flat 2 percent eSLR buffer. Instead, they’ll be required to hold a buffer equal to 50 percent of their GSIB “surcharge”, as calculated using Method 1 of the Federal Reserve’s framework.

Regulators argue this calibration better reflects banks’ actual risk, freeing them from a rule that has become overly restrictive. According to the FDIC, the relaxed rule could reduce capital requirements by approximately $13 billion at the holding-company level, and by up to $213 billion (around 27%) at the depository subsidiary level.

For large U.S. banks — such as JPMorgan Chase, Goldman Sachs, and Bank of America — the change may provide greater balance‑sheet flexibility. By lowering the capital burden for low‑risk assets, regulators expect these institutions to reallocate capital toward lending and market‑making activities, particularly in Treasury markets, where they can now act more aggressively.

Backers emphasize that the move supports liquidity and resilience in the $29‑trillion U.S. Treasury market — especially during times of stress — because banks will face fewer regulatory penalties for holding Treasuries. However, not all are convinced: some Fed governors and financial stability experts warn that loosening capital buffers could reduce the system’s shock-absorption capacity.

Broader Regulatory and Macro Context

This policy is emerging amid a broader deregulatory agenda by U.S. banking agencies, including the Federal Reserve, FDIC, and OCC. It aligns with earlier efforts to ease post‑2008 capital rules. Acting FDIC Chairman Travis Hill explicitly cited the need to rebalance the eSLR over time, arguing it has become “frequently binding” and disincentivizing banks from holding low-risk, low-yield assets.

At the same time, regulators asked stakeholders to comment on further tweaks, such as excluding certain Treasury holdings from leverage calculations. Proponents believe such moves could further support market functioning, but any additional easing is likely to draw close scrutiny from prudential regulators.

Looking ahead, investors and market watchers should monitor adoption timelines, because although the final rule is approved, banks have until April 1, 2026 to comply — and some may opt in earlier. Key risks include a potential weakening of capital cushions if markets turn volatile, as critics worry that systemic risk could rise. On the opportunity side, the change may enable banks to deploy capital more efficiently, particularly in supporting the Treasury market, boosting liquidity, and potentially stabilizing pricing during stressed conditions.