FOR IMMEDIATE RELEASE
Mar. 19, 2021
Fed Right to Abandon Relief Measures for Big Banks
Today, banking regulators announced that they would not be extending one of the largest elements of pandemic-related regulatory relief, the exemption that allowed banks to remove almost $2 trillion in government securities assets from their balance sheets for the purposes of complying with capital regulations. That was the right thing to do.
“Coronavirus-related regulatory forbearance and other Federal emergency actions allowed big banks to hold far less of their own equity capital than they otherwise would have,” said Marcus Stanley, policy director at Americans for Financial Reform. “This put taxpayers and the financial system at risk.
As an AFR report from October 2020, “Backdoor Bailout,” pointed out, over the past year regulators had been permitting banks to report inflated capital ratios rather than building up their capital to absorb losses in potential future economic disruptions. This decision marks the end of a key part of that policy.