Summary:
Our evidence suggests that banks were arbitraging the SLR (and eSLR) rule by shifting from safer assets toward riskier, higher-yielding ones. Evidence from other studies we discuss point to the same behavior by banks or dealers with portfolios heavily weighted toward safe, low-yield assets as part of their business models. Policymakers are aware of this regulatory arbitrage and are addressing it. FRBNY — Liberty Street EconomicsLeverage Rule Arbitrage Dong Beom Choi, Michael Holcomb, and Donald P. Morgan
Topics:
Mike Norman considers the following as important: money and banking, supplementary leverage ratio (SLR) rule, US financial sector
This could be interesting, too:
Our evidence suggests that banks were arbitraging the SLR (and eSLR) rule by shifting from safer assets toward riskier, higher-yielding ones. Evidence from other studies we discuss point to the same behavior by banks or dealers with portfolios heavily weighted toward safe, low-yield assets as part of their business models. Policymakers are aware of this regulatory arbitrage and are addressing it. FRBNY — Liberty Street EconomicsLeverage Rule Arbitrage Dong Beom Choi, Michael Holcomb, and Donald P. Morgan
Topics:
Mike Norman considers the following as important: money and banking, supplementary leverage ratio (SLR) rule, US financial sector
This could be interesting, too:
Mike Norman writes In Groundbreaking Move, Fed Excludes Treasurys From Leverage Ratio Rule: Here’s What That Means — Tyler Durden
Mike Norman writes Banks And Money (Sigh) — Brian Romanchuk
Mike Norman writes Lars P. Syll — The weird absence of money and finance in economic theory
Mike Norman writes J. W. Mason — “On money, debt, trust and central banking”
Our evidence suggests that banks were arbitraging the SLR (and eSLR) rule by shifting from safer assets toward riskier, higher-yielding ones. Evidence from other studies we discuss point to the same behavior by banks or dealers with portfolios heavily weighted toward safe, low-yield assets as part of their business models. Policymakers are aware of this regulatory arbitrage and are addressing it.FRBNY — Liberty Street Economics
Leverage Rule Arbitrage
Dong Beom Choi, Michael Holcomb, and Donald P. Morgan