US Bank Regulators Finalize Treasuries-Linked Capital Plan: Industry Impact Analysis

This analysis is based on the Reuters report [1] published on November 11, 2025, which reported that U.S. bank regulators reached agreement on terms to ease capital requirements that could allow banks to hold more U.S. Treasury securities.

The regulatory agreement represents a fundamental shift in U.S. banking oversight, specifically targeting the Enhanced Supplementary Leverage Ratio (eSLR) framework that has constrained banks’ Treasury market participation. The Federal Reserve, FDIC, and OCC have coordinated on a plan that recalibrates capital requirements while maintaining appropriate safeguards [0][1].

The proposal would set the eSLR standard for Global Systemically Important Banks (GSIBs) to equal 50% of their method 1 surcharge rather than the current fixed 2% buffer standard. This change delivers substantial capital relief:

• Holding company level: 23% reduction in supplementary leverage ratio requirements
• Depository institution level: 36% reduction for major subsidiaries
• Aggregate capital reduction: $13 billion for GSIBs and $213 billion for their major depository institution subsidiaries [0]

The recalibration creates significant new capacity for Treasury market participation:

• GSIBs’ available capacity for reserves and Treasuries increases from nearly zero to $1.1 trillion (6% of total leverage exposures)
• Broker-dealer subsidiaries gain $2.1 trillion in capacity (12% of total leverage exposures) [0]

This expansion occurs against a backdrop of dramatic Treasury market growth, with outstanding securities increasing 139% since 2014 to $24 trillion, while banking organizations’ Treasury holdings grew 264% to $1.54 trillion [0].

The multi-agency coordination reflects a mature understanding that prudential standards must balance financial stability with market functioning. By making leverage requirements serve as a backstop rather than binding constraint, regulators acknowledge that risk-based capital requirements are more appropriate for low-risk assets like Treasuries [0].

Large banks with significant broker-dealer operations will gain substantial competitive advantages in Treasury market making, securities financing, and client treasury services. The changes align U.S. standards more closely with international frameworks while maintaining safeguards, potentially enhancing global competitiveness [0].

The Treasury market has evolved dramatically with primary dealer positions increasing 155% to $0.6 trillion. The regulatory changes address capacity constraints that have emerged as the market expanded, potentially reducing the need for emergency regulatory interventions during stress periods [0].

• The plan requires White House approval and implementation may face delays
• Banks must develop revised capital planning strategies and risk management frameworks
• Enhanced regulatory monitoring will be required to track systemic risk implications [0][1]

• Immediate relief from binding leverage constraints enables gradual Treasury market expansion
• Improved market depth and liquidity should reduce transaction costs
• Enhanced resilience during stress periods supports more stable bid-ask spreads [0]

• Banks should evaluate scaling Treasury market operations and optimizing subsidiary structures
• Capital reallocation to highest-value activities becomes feasible
• Sophisticated interest rate and market risk management frameworks become essential [0]

The regulatory agreement submitted to the White House on November 11, 2025, represents the culmination of a multi-year effort to address Treasury market capacity constraints. The proposal would reduce GSIB supplementary leverage ratio requirements by 23-36% while creating $3.2 trillion in combined capacity for Treasury holdings across banking organizations and their broker-dealer subsidiaries [0][1].

The changes maintain financial stability safeguards through risk-based capital requirements that remain above leverage ratios, ensuring prudential standards serve as appropriate backstops. The phased implementation approach, expected in the coming weeks, will provide transition periods for compliance while enabling banks to expand their role in critical Treasury market intermediation [0][1].

Market participants should experience improved liquidity and pricing, while regulators gain enhanced tools for monitoring systemic risk. The recalibration reflects careful balance between market efficiency, financial stability, and international standard alignment [0].