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Bank Capital Rules and Basel III Endgame Cited as Constraint on Dealer Liquidity
Summary
Witnesses warned that the supplemental leverage ratio and proposed Basel III changes, including the GSIB surcharge and trading‑book reforms, could reduce primary dealers' capacity to intermediate Treasury markets and urged regulatory adjustments.
Multiple witnesses told the task force that non‑risk‑sensitive capital measures are constraining dealers' ability to intermediate Treasury trades, particularly in stress periods, and that proposed Basel III "endgame" changes could exacerbate the problem.
Tom Whiff, who led the Treasury Market Practices Group, and Scott O'Malia of ISDA pointed to the supplementary leverage ratio (SLR) as a principal driver of reduced dealer balance‑sheet capacity. Whiff said, "The SLR and other leverage requirements are…
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