Trump & SLR: Impact on Treasury Markets
The Trump governance is considering banking deregulation and SLR reform,a move that could drastically effect the U.S. Treasury market. The core issue? Potential reform of the Supplementary leverage Ratio (SLR), which dictates the capital banks must hold. Reforming the SLR to permanently exclude Treasuries could free up trillions for U.S. banks to purchase more bonds. This change could offset decreased demand from foreign countries, creating a ample new buyer in the market. Key insights follow Michael Barr’s resignation and Michelle Bowman‘s recent speech signaling a possible shift in approach. This banking deregulation is crucial. News Directory 3 provides more data on this developing story. Discover what’s next for the U.S. Treasury market…
Trump Administration Considers Banking Deregulation, SLR Reform
Updated June 12, 2025
The Trump administration is weighing critically important banking deregulation, a move that could have substantial implications for the U.S. Treasury market. The focal point is potential reform of the Supplementary Leverage Ratio (SLR), a regulation that dictates the amount of capital banks must hold against their total leverage exposure.
The move follows Michael Barr’s January resignation as vice chair for supervision at the Federal Reserve, a position responsible for shaping banking regulation. This opened the door for President Trump to appoint Michelle Bowman as the new vice chair. Bowman recently addressed banking regulation in a key speech.
“Where we can take proactive regulatory measures to ensure that primary dealers have adequate balance sheet capacity to intermediate Treasury markets, we should do so. This could include amending the leverage ratio and G-SIB surcharge regulations for the largest U.S. banks. In my view, it would be better to fix the roof now, while the sun is shining, by addressing over-calibrated leverage ratio requirements,” Bowman saeid.
This statement signals a possible shift in the administration’s approach to banking regulation, specifically regarding the SLR. the SLR requires U.S. banks to maintain a capital buffer against their total assets, including low-risk instruments like Treasuries. During the pandemic, regulators temporarily exempted Treasuries from the SLR calculation to encourage banks to support the U.S. bond market. That exemption has as expired.
Reforming the SLR to permanently exclude Treasuries could unleash trillions of dollars in balance sheet capacity for the largest U.S. banks.This would enable them to purchase more U.S. bonds, perhaps offsetting any decreased demand from foreign countries due to perceived disruptions from Trump administration policies. This banking deregulation could create a new, substantial buyer in the U.S.Treasury market.
What’s next
The Trump administration’s next steps regarding banking deregulation and SLR reform will be closely watched by financial institutions and investors alike.The potential impact on the U.S.Treasury market is significant, and any changes could have far-reaching consequences.