Earlier this month, the Fed proposed a temporary easing of a supplementary leverage ratio rule that applies to the biggest U.S. banks that have assets of more than $250 billion.
Temporarily easing the ratio in Europe would ensure that relief packages from governments and central banks to help the economy recover work well in practice, Gonzalo Gasos, senior director of prudential policy and supervision at the European Banking Federation, an industry body, said.
“The leverage ratio could be an impediment to the flow of liquidity,” Gasos said.
“What we are asking regulators in Europe is whether reserves held at central banks and exposures to government bonds should be part of the leverage ratio,” Gasos said.
“In anticipation that the amount of exposures to central banks and governments could grow, that could put a limit on the capacity of banks’ balance sheets,” Gasos added.
The full article is available at https://www.reuters.com/article/us-health-coronavirus-banks-regulator/europes-banks-want-regulators-to-match-u-s-leverage-plan-idUSKBN22226I
- In 2018 the ECB said that it did not want to exempt repo in particular from the Leverage Ratio, thereby putting its foot down to a version of what the European Banking Federation would like to see. Perhaps in the coronavirus era their opinion will have changed.
- That said, the European Parliament in 2018 said that it was considering the measure.
- We’ve been betting since 2017 that the EU will feel competitive pressure from US deregulatory moves and will be compelled to follow suit. Our analysis at As the US gets serious about deregulation, what will Europe do? tells the story.