Bank of America Chairman and CEO Brian Moynihan told lawmakers today that “it’s important to look at [the Supplemental Leverage Ratio] again and make sure it’s calibrated correctly,” in light of lessons learned from the COVID-19 pandemic.
Responding to a question from the House Financial Services Committee’s Trey Hollingsworth (R-Ind.), Moynihan noted that when banks began to receive an influx of deposits and “we went out and bought Treasurys, it left overnight cash in the Fed. So we probably went from $100 billion to $300 or $400 billion overnight in the Fed, and you were still holding capital against that. That doesn’t quite make sense, and can work against the idea of injecting monetary support into the economy.”
Moynihan added that “the industry has made many suggestions over the years that completely riskless assets may not have a place” in leverage ratios. The American Bankers Association has long advocated for regulators to extend their pandemic response measures, including SLR and community bank leverage ratio flexibility, that avoid unnecessary balance sheets rigidity during times of stress. In a data-driven blog post earlier this year, ABA advocated for the exclusion of these safe assets that have grown on bank balance sheets because banks are serving their traditional role as a haven during the pandemic.
