Senate and House Democrats Urge Banking Regulators to Withdraw eSLR Proposal

Senate and House Democrats called on federal banking regulators to withdraw a proposed rule that would "significantly reduce the enhanced supplementary leverage ratio ("eSLR") requirement for the eight U.S. global systemically important banks."

In a letter to Federal Reserve Vice Chair for Supervision Michelle Bowman, Acting FDIC Chair Travis Hill, and Comptroller of the Currency Jonathan Gould, the lawmakers warned that the proposal could reduce big bank capital by more than $200 billion, shrink lending capacity by up to $2.7 trillion, and heighten the risk of taxpayer bailouts. They pointed out that the eSLR, adopted after the 2008 crisis, is a straightforward safeguard that ensures big banks fund part of their activities with equity rather than excessive debt. The lawmakers argued that weakening the eSLR would allow Wall Street firms to increase leverage and divert resources to dividends and share buybacks, leaving the financial system more vulnerable to shocks.

The lawmakers described the proposal as "extreme deregulation," arguing that it goes beyond measures floated by regulators in 2018. They warned that excessive leverage was a major factor in the 2008 crisis as well as the large bank failures in 2023. They criticized the regulators’ claim that lowering the requirement would promote greater participation in the Treasury market, noting that banks already have trillions in unused capacity under existing rules, but have chosen not to use it. The legislators argued that relaxing capital requirements at this time—given current economic uncertainty and policy-driven risks—would repeat the mistakes that fueled past financial crises and expose taxpayers to renewed risks.