The United States plans to ease capital restrictions on bank trading of government bonds.

On June 18, U.S. major banking regulators plan to cut key capital buffer requirements for large banks by as much as 1.5 percentage points. Previously, there were concerns in the industry that the existing rules restricted banks’ trading activities in the $29 trillion Treasury market. According to informed sources, The Federal Reserve (FED), the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are focusing on the so-called Enhanced Supplementary Leverage Ratio (eSLR), which applies to U.S. systemically important banks such as JPMorgan Chase, Goldman Sachs, and Morgan Stanley. The new proposal aims to reduce the capital requirement for bank holding companies under the eSLR from the current 5% to a range of 3.5%-4.5%. Capital requirements for bank subsidiaries are also expected to be simultaneously reduced from 6% to the same range. This adjustment is similar to the ‘customization’ revision approach for the eSLR calculation for systemically important banks during the Trump administration in 2018, but specific terms may still be subject to change. (Jin10)