A zombie US capital ratio comes back to life
SLR rollback could mark the return of 1990s Tier 1 leverage ratio as a binding constraint
A largely forgotten US capital ratio from the early 1990s is threatening to derail the Federal Reserve's regulatory response to the Covid-19 crisis, prompting bank supervisors to consider additional measures.
The rule, known as the Tier 1 leverage ratio, was first introduced in 1991 and preserved in the Collins Amendment to the Dodd-Frank Act. It requires banks to hold 4% capital against average total on-balance-sheet assets.
After stricter capital rules were relaxed, this is becoming a
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