Fed Will Let Significant Capital Break for Big Banks Expire

The transcript discusses the expiration of the leverage ratio exemption for banks, requiring them to hold more capital against their leverage exposure. The exemption was initially granted to prevent banks from reducing lending during the pandemic. With the exemption ending, banks must adjust their capital holdings, but they currently have sufficient capital. The Fed is considering changes to the leverage ratio application due to increased reserves, which could affect market stability. Despite concerns, the market has adjusted, and the Fed believes the current situation is manageable.

What is the potential impact of banks pulling back on lending due to capital requirements?

What concerns arose regarding banks taking deposits and buying Treasurys?