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Macro expert: Banks are likely to buy more risk assets soon!

Less Noise, More Signal

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Debating the Supplementary Leverage Ratio

This chapter examines the implications of proposed changes to the Supplementary Leverage Ratio (SLR) for banks holding US treasuries, particularly the potential lowering of the requirement from 6% to 3.5%. It highlights concerns that easing capital requirements could lead banks to engage in riskier investments, drawing parallels to past financial crises such as the Silicon Valley Bank failure. The discussion also touches on the effects of Federal Reserve policies on bank behavior and the balance between safe and risky asset investments.

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