Bowman, Modernizing Financial Regulation: Initial Observations from eSLR

AI desk brief

Fed Vice Chair Bowman said the 2025 eSLR recalibration was intended to stop leverage rules from binding on large bank dealers and impairing Treasury-market intermediation. She said the change has already improved market functioning, with parent BHCs of six dealers gaining nearly $5 trillion of additional eSLR headroom in Q1 2026 and dealer Treasury positions rising from about $600 billion at the start of the modification period to over $700 billion by end-April.

Bowman argued the prior eSLR treatment pushed banks away from lower-risk Treasury holdings and into activities with higher returns but not necessarily lower risk, reducing liquidity when balance-sheet capacity was scarce. The Fed said the new buffer calibration aligns leverage requirements with their intended backstop role, and staff research is said to confirm that the increase in Treasury positions was concentrated at the most constrained banks.