Fed to let SLR Relief Expire With Modifications Forthcoming; Impact on U.S. Banks is Manageable

DBRS, Inc. (DBRS Morningstar) published a commentary reviewing the impact of the expiration of the temporary relief granted to the supplementary leverage ratio (SLR) calculation for bank holding companies.

Key highlights include:

-- While DBRS Morningstar considers it a bit of a surprise, the impact on U.S. banks will be manageable in our view.
-- Even without the impact of regulatory relief, U.S. G-SIBs would be well in excess of their SLR requirements at YE20, but these buffers would decline over time, as liquidity continues to be pumped into the system.
-- As a result, U.S. GSIBs will likely address this by issuing preferred stock, which would be easily absorbed by the marketplace, particularly given the low yield environment, and/or by turning away deposits.

“Overall, we view the impact of the SLR relief expiration on U.S. GSIBs as credit neutral.” said Michael McTamney, Senior Vice President.

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.