WASHINGTON — House Financial Services Committee Chairwoman Maxine Waters is urging regulators not to extend banks’ relief from a key capital requirement that was granted last spring, joining other congressional Democrats opposed to weakening bank rules during the coronavirus pandemic.
The California Democrat warned regulators in a letter not to continue to exclude Treasury securities and reserves held at the Federal Reserve from a bank's supplementary leverage ratio. Regulators introduced the exemption in April 2020 to help banks respond to the pandemic, but it is slated to expire at the end of this month. The SLR is a capital requirement imposed on banks with at least $250 billion of assets.
Waters echoed other critics of the regulatory relief who point out that banks have continued to make shareholder payouts despite the capital relief.
“It has been disappointing to observe your agencies permitting big banks to make capital distributions while advancing proposals that directly or indirectly weaken large bank capital requirements, including through a weaker stress testing regime,” Waters said in the letter, dated Tuesday, to key leaders at the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency. “The temporary exclusion to the SLR is a mistake that should not be perpetuated after it expires at the end of this month.”
Waters has generally opposed weakening banks’ capital requirements during the coronavirus pandemic, arguing that banks need to maintain strong capital to promote financial stability in times of economic distress.
“With the path of the economy highly uncertain in the months ahead, it is crucial that regulators remain vigilant, requiring the largest banks to maintain loss-absorbing capital to guard against risks,” Waters wrote.
Banks have asked regulators to keep the SLR relief in place as the industry and government continue to respond to the economic impact of the pandemic.
While regulators have not determined if they plan to extend the relief, Waters urged them to consult with Treasury Secretary Janet Yellen.
“If your agencies were to consider extending or otherwise modifying capital, leverage, or other prudential requirements for the largest banks, I would like to know if you plan to consult with the Secretary of the Treasury, Janet Yellen, in her role as the Chair of Financial Stability Oversight Council (FSOC), prior to making those decisions,” Waters wrote.
