Sunday , November 24 2024
Home / Mike Norman Economics / Liberty Street — Leverage Rule Arbitrage

Liberty Street — Leverage Rule Arbitrage

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: , ,

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

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *