Big banks may get a big gift in the stimulus bill being drafted by Senate Republicans. Lawmakers are expected to include language that would give the Federal Reserve authority to relax a requirement surrounding capital levels at the biggest banks, essentially allowing firms to load up on riskier assets, according to three people familiar with the effort. The push is the culmination of a monthslong effort by industry lobbyists and a top Federal Reserve official to change a restriction put in place in the wake of the 2008 financial crisis to prevent banks from engaging in risky behavior. Right now, banks must count all assets — including relatively safe ones like customer deposits that banks choose to park at the Federal Reserve and Treasury securities — when calculating the level of capital they must hold against the overall amount of those assets. That so-called leverage ratio is supposed to constrain risk-taking by ensuring banks have enough capital on hand in the event of a severe downturn, when even the safest kinds of assets may carry unanticipated risks.

Source: New York Times July 27, 2020 22:18 UTC