An esoteric bank capital rule has become an unlikely political hot potato for U.S. Federal Reserve Chair Jerome Powell, as the Republican appointee enters the final 12 months of his term under the administration of Democratic President Joe Biden, analysts said.
Whether to extend the relief has become the first major political test for Powell under the Biden administration as, like his predecessors, he is expected to seek re-nomination. Regulators introduced the supplementary leverage ratio following the decade-ago financial crisis as an extra safeguard. It requires big banks to hold an additional layer of capital against assets, regardless of their risk.
Progressives, including Senators Elizabeth Warren and Sherrod Brown, who now heads the Senate Banking Committee, say banks are cynically seizing an opportunity to ease more rules. Under Powell's leadership, the Fed has revised and eliminated bank rules arguing they were overly burdensome. The changes drew the ire of progressive Democrats and advocacy groups, who say they increase risks and hurt consumers.
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