From 5 % to less than 4 %: banking rules ready to radically change the US economy

Washington is preparing to erase one of the flagship rules established after the 2008 financial crisis. A discreet, but decisive reform is about to redefine the foundations of American banking regulation. Indeed, the regulators plan to depth modify the “Supplementary Leverage Ratio” (SLR), a pillar of post-Krach stability. If it leads, this decision could upset financial architecture, with major consequences for the world economy.

Why lighten the SLR? Supporters want to relaunch the economy

For promoters of this reform, the objective is clear: adapt banking regulation to a new economic reality. The rules imposed after 2008 are deemed too rigid in a world where liquidity has become crucial. By lightening the SLR, Banks could again support the economy by buying more treasury billswhile more easily funding businesses.

This measurement is part of the deregulation strategy defended by the Trump administration. By aligning American standards with those of Europe or Asia, the authorities intend to strengthen the competitiveness of national financial institutions.

“” Penalize banks that have low -risk assets, such as treasury bills, compromises their ability to support market liquidity “Said Greg Baer, ​​director of the Bank Policy Institute. Translation: it is necessary lift the regulatory brakes So that the banking system can play its role in times of crisis.

In addition, some experts believe that the SLR unnecessarily obstructs the agility of banks in an environment where adaptability is vital. “” The US Treasury Market can block in times of crisis partly due to the SLR “Warns Darrell Duffie, professor at Stanford.

The message is clear: No more room for maneuver means more resilience for the economy.

A reform that benefits banks … and the economy?

The softening of the SLR gives oxygen to large American banks. This would allow them to release capital to finance activities deemed more productive, for the direct benefit of the economy. Establishments like JP Morgan or Goldman Sachs see it A lever to become the pillars of a dynamic financial ecosystem.

In addition, this change would promote the resumption of certain operations neglected since 2014. Banks could reposition themselves on The public debt market, now dominated by hedge funds and high frequency traders.

Ultimately, this reform could also lower borrowing costs, by increasing demand for public securities. Donald Trump sees an opportunity to boost the American economy everything by facilitating the financing of state expenditure. Another alternative to bitcoin and other cryptocurrencies, active that it seems to be likely.

Many observers also recall that the current SLR requirements in the United States (5 %) are much stricter than in other regions of the world, where they vary between 3.5 %and 4.25 %. Supporters of the reform therefore see it as a simple rebalancing.

However, the positive effects imply A cautious implementatione. The economy is a sensitive terrain, and each active lever can produce unexpected side effects. It is in this gray area that the debate intensifies.

What was the SLR and why was it established?

SLR was introduced in 2014. It requires large banks to hold a certain percentage of capital compared to all of their assets, without weighting of the risk. This rule aimed to prevent the economy from diving into a crisis like that of 2008.

Concretely, here is what to remember:

• The eight largest American banks must maintain capital equivalent to 5 % of their assets;
• In Europe or Asia, the ratio is between 3.5 % and 4.25 %;
• In the event of stress in the markets, this cushion limits chain bankruptcies;
• The ratio is calculated without taking into account the specific risk of each asset;
• Its reform could increase the share of banks in public debt, estimated at $ 1.8 trillion out of a total of 28 trillions.

But criticisms do not disarm. According to senator Elizabeth Warren:

These proposals would put our entire economy in danger of another crash paid by taxpayers.

Translation: The 2008 memory remains lively.

While the SLR reform approaches, another decision complements this great maneuver. The Office of the Comptroller of the Currency (OCS) recently authorized American banks to buy, sell and keep cryptocurrencies. This convergence between banking deregulation and opening to digital finance reflects a clear ambition: strengthening the economic power of the United States in a rapidly changing world.