Fed will end pandemic- era big- bank lending flexibility

With markets on more solid footing, relief will expire March 31.

The Federal Reserve said Friday it would not extend the temporary regulatory relief it granted to large banks as the pandemic upended the economy.

Put in place a year ago, the change eased banks’ capital requirements to encourage them to keep lending as financial markets appeared shaky. The temporary move let banks exclude U.S. Treasury sand central bank reserves when calculating their Supplementary Leverage Ratio, a key measurement of a bank’s risks tracked by regulators.

The banking industry had pushed regulators to keep the change in place, while Democrats urged the Fed to reimpose more stringent regulations. The Fed said it will let the relief expire March 31, now that markets are on firmer footing. Fed officials said they were confident doing so would not hamper markets. The largest banks have about $ 1 trillion in capital, and ending regulatory relief won’t shift those levels much, Fed officials said.

But the Fed opened the door to making longer- term changes to the Supplementary Leverage Ratio, which emerged from reforms put in place after the Great Recession that sought to keep banks from taking on too much risk. The timeline for that process is not yet clear.

“The Board may need to address the current design and calibration of the SLR over time to prevent strains from developing that could both constrain economic growth and undermine financial stability,” the Fed said in a statement.