While the Fed's decision to review the rule is a win for Wall Street banks, which have long argued the leverage ratio is fundamentally flawed, its refusal to extend the exemption, as many analysts had expected, came as a disappointment. Shares of the largest U.S. banks fell after the news, with JPMorgan Chase & Co losing as much as 4% before closing down 1.6% on the day. Bank of America Corp's and Citigroup Inc lost 1% and 1.1%, respectively.
WASHINGTON: Big U.S. banks will have to resume holding an extra layer of loss-absorbing capital against U.S. Treasuries and central bank deposits from next month after the Federal Reserve said on Friday it would not extend a temporary pandemic regulatory break due to expire this month.
The Fed said it would, however, launch a formal review of the capital rule, known as the "supplementary leverage ratio," due to concerns it is no longer functioning as intended as a result of the central bank's emergency COVID-19 monetary policy measures.
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