Powell suggests review of capital rule to boost central clearing

Jerome H. Powell, a governor on the board of the Federal Reserve System, prepares to testify to the Senate Banking Committee on Capitol Hill in Washington, U.S., June 22, 2017. REUTERS/Joshua Roberts

WASHINGTON (Reuters) - U.S. capital rules may discourage banks from central clearing of securities and the Federal Reserve is considering reform, Fed Governor Jerome Powell said in Friday.

Capital rules that are blind to risks and require banks to hold capital based on the size the investment may be part of the problem, Powell said.

“In my view, the calibration of the enhanced supplementary leverage ratio (SLR) for the U.S. global systematically important banks should be reconsidered from this perspective,” Powell told a Chicago symposium on central clearing.

Former Fed governor Daniel Tarullo, an author of the SLR, said in his final Fed speech that the rule meant to brace against a future financial shock could be tweaked.

Reporting By Patrick Rucker and Pete Schroeder; Editing by Chizu Nomiyama