US regulators are planning to relax capital rules for banks, targeting the supplementary leverage ratio that ensures banks hold sufficient high-quality capital against risky assets. This move is part of a broader deregulation agenda driven by the Trump administration, following intense lobbying from the banking sector. Critics warn that such rollbacks may lead to increased financial instability given the current market volatility, while banks argue that the existing guidelines inhibit their lending capacity, especially for low-risk assets like US treasuries. This regulatory shift may also impact the UK's competitive position.
The regulators are expected to put forward proposals this summer to cut the supplementary leverage ratio that requires big banks to hold high-quality capital against risky assets.
Critics warn that slashing protections at this time is ill-advised, especially given the market volatility and uncertainty over policy changes.
Lobbyists assert that existing rules penalize banks for holding low-risk assets such as US treasuries, which constrains their capacity to extend loans.
The potential deregulation raises fears that the UK might lose its competitive edge if it continues with stricter regulations compared to the US.
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