“Taken together, these changes would significantly increase the risk that a G-SIB bank would fail, orderly resolution would not be possible, and the Deposit Insurance Fund would incur higher losses,” Barr warned prior to his departure.
The proposal has also drawn fire from progressive lawmakers. Senator Elizabeth Warren, a Democrat from Massachusetts, has called the leverage rule a “critical safeguard” that helps ensure financial stability. In a letter to regulators, she voiced concern that loosening the rule could exacerbate economic risks.
The $210 billion reduction in bank-level capital projected by the proposal has stoked fears that easing the rule could increase systemic risk. However, supporters argue the change would free up balance sheets, enabling banks to better manage liquidity and support trading in Treasuries without undermining core capital strength.
The proposal now enters a public comment period, and its final version could still undergo revisions.
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