April 24, 2025

Sent via Electronic Submission

The Honorable Travis Hill
Acting Chair
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

The Honorable Rodney Hood
Acting Comptroller
The Office of the Comptroller of the Currency
400 7th Street , S.W.
Washington, DC 20219

The Honorable Scott Bessent
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Re: Exempting U.S. Treasuries from leverage ratios

Dear Acting Chair Hill:

Given the current economic uncertainty, volatility in the Treasury market, and anticipated increases in issuance, bank affiliated primary dealers are facing increased balance sheet constraints in intermediating the U.S. Treasury market. To alleviate this situation and to support greater Treasury market liquidity, SIFMA¹ and its members would urge the FDIC, along with other regulators and Congress where appropriate, to take action and permanently exempt U.S. Treasury securities from the leverage ratios imposed on banks, including both the supplementary leverage ratio (“SLR”) and the U.S. Tier 1 leverage ratio.

In severe market downturns, banks’ expanding balance sheets can cause leverage ratios to become a binding capital constraint. This forces banks to cut back on market intermediation, harming market liquidity, including in the U.S. Treasury market and other credit markets. During the Covid crisis, the FDIC temporarily excluded U.S. Treasuries and deposits at the Federal Reserve Banks from the calculation of the SLR for this reason.

The CBO expects Treasury issuance will grow at an annual rate of approximately 5.7% while over the last decade bank balance sheets have been growing at an annual rate of only 3.8%. Without  regulatory relief measures bank balance sheet growth alone will not be sufficient to ensure dealers have sufficient balance sheet capacity to facilitate the Treasury market needs and those of the broader economy.

In theory, the mandatory central clearing of Treasury cash and repos, along with the exemption of Treasuries from leverage ratios, both possess the potential to bolster bank participation in the U.S. Treasury market. However, our recent study indicates that exempting Treasuries from leverage ratio calculations would significantly alleviate balance sheet capacity constraints, whereas central clearing would not provide noticeable benefits. The study is attached to this letter.

I am available to discuss this further and provide any additional information that you might require.

With kindest personal regards,

Kenneth E. Bentsen, Jr.
President & CEO

1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (“GFMA”). For more information, visit http://www.sifma.org. [↩]