by Topic came up in yesterday's testimony by Powell... between his being chastised by dumb Democrat legislators that the US was leaving too much debt to the grandchildren...The unqualified Journo doesn't describe the technical issue correctly here: The supplemental leverage ratio, which measures capital as a percentage of assets, restricts the amount of loan-making banks can make without raising more capital. Calculation of the ratio includes the non-risk assets as well as the risk assets ("loan-making") of a depository institution. It would be better described: "The supplemental leverage ratio, which measures capital as a percentage of assets, restricts the amount of loan-making banks can make AND reserve assets banks can posses... without raising more capital."So any policy that
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Topic came up in yesterday's testimony by Powell... between his being chastised by dumb Democrat legislators that the US was leaving too much debt to the grandchildren...
The unqualified Journo doesn't describe the technical issue correctly here:
The supplemental leverage ratio, which measures capital as a percentage of assets, restricts the amount of loan-making banks can make without raising more capital.
Calculation of the ratio includes the non-risk assets as well as the risk assets ("loan-making") of a depository institution.
It would be better described: "The supplemental leverage ratio, which measures capital as a percentage of assets, restricts the amount of loan-making banks can make AND reserve assets banks can posses... without raising more capital."
So any policy that would increase the amount of reserve assets would move the needle away from the regulatory ratio set point; and action would then be taken to adjust the other parameters (i.e. the risk asset values) to bring the ratio back towards set point.
(Again... checkmate...)
From the Fed's latest H.8 release they have currently set the system level of reserve assets at $2.4T (!!!!!!) so if the proposed reform eliminates these non-risk assets from inclusion in calculating the SLR, as banks seem to run at about a 0.10 LR, that mod would seem to provide the depository system with at least $240B of excess capital to do something with... i.e. dividends, buy-backs, increase of loans, or any combination...
Fed Chairman Powell said he supports "recalibration" of the supplementary leverage ratio https://t.co/z9tyHV2mS2— WSJ Financial Reg (@WSJFinReg) February 27, 2018