Fed finalizes eSLR overhaul, boosting Treasury market capacity

The Federal Reserve Board, together with the FDIC and OCC, finalized revisions to the enhanced supplementary leverage ratio (eSLR) for U.S. global systemically important institutions (GSIBs) in November 2025. The final rule became effective April 1 2026, with optional early adoption beginning January 1 2026, and seven of the eight U.S. GSIBs adopted it early in the first quarter.

Under the revised framework, the eSLR buffer for GSIBs equals 50 percent of a GSIB's method-1 surcharge calculated under the Board's GSIB surcharge framework, replacing the prior flat 2 percent buffer. For insured depository institution subsidiaries of a GSIB, the buffer also equals 50 percent of the parent's method-1 surcharge but is capped at 1 percent. The change tailors the eSLR to each GSIB's systemic footprint and aligns the U.S. leverage ratio framework with the Basel Committee's standards.

Early supervisory data indicate that the recalibration has generated substantial balance-sheet relief. In the first quarter of 2026, the parent bank holding companies of six dealers gained nearly $5 trillion of additional eSLR headroom in aggregate. Dealers' total Treasury positions rose from roughly $600 billion at the start of the modification period to over $700 billion by the end of April. Market contacts reported that leveraged capacity at GSIBs surged from $1.8 trillion in the fourth quarter of 2025 to $6.4 trillion after the new rule took effect, and leveraged exposure across GSIBs increased by approximately $900 billion.

The additional headroom has allowed dealer subsidiaries to expand Treasury holdings and support other balance-sheet-intensive market-making activities. Supervisory observations note narrower bid-ask spreads, reduced intraday volatility during auction cycles, and calmer funding conditions, suggesting that the revised eSLR is functioning as a backstop rather than a binding constraint.

The Fed's action illustrates the agency's statutory duty to review and modernize regulations when data reveal frictions. By calibrating the eSLR to each institution's systemic risk profile, the Board aims to preserve market resilience while maintaining consistency with international capital standards.