US bank regulators to soften capital requirements — Bloomberg

Bloomberg reports that US bank regulators plan to soften capital requirements for the country's largest lenders. 

According to the news agency, the Federal Reserve, the Federal Deposit Insurance Corp., and the Comptroller of the Currency intend to lower the enhanced supplementary leverage ratio (ESLR) to a range between 3.5% and 4.5% from the current level of 5%.

ESLR ensures that lenders own enough capital to act as a back-up against riskier holdings. It is designed to reduce systemic risk among major American banks, such as JPMorgan Chase & Co., Goldman Sachs Group Inc., and Morgan Stanley. 

However, ESLR has been subject to criticism for dampening the lenders’ ability to hold US Treasuries. Recent debt auctions faced weak demand due to growing uncertainty over the impact of Donald Trump's fiscal policy on the budget deficit and economy. A lower ESLR would increase liquidity in the Treasury Bond market and help reduce government borrowing costs by driving down yields.