Federal Reserve Vice Chair for Supervision Michelle Bowman said changes to a capital requirement for the largest U.S. banks have increased dealer capacity and improved Treasury market functioning, offering the Fed’s clearest early assessment yet of how last year’s enhanced supplementary leverage ratio overhaul is affecting the market.
Speaking October 1 at the Atlantic Council 2026 CEO & Senior Management Summit in Washington, Bowman said in her prepared remarks on the eSLR changes that dealer Treasury positions rose from roughly $600 billion at the beginning of the modification period to more than $700 billion by the end of April. She attributed the increase primarily to firms that had previously operated with the smallest eSLR buffers.
That assessment is new. Bowman had previously argued that recalibrating the rule would improve Treasury-market resilience; Thursday’s speech moved from that expected effect to an initial assessment based on supervisory data, market outreach and forthcoming Fed staff research.
Dealers gained more room to hold Treasuries
The eSLR applies to U.S. global systemically important banks and is designed as a leverage-based backstop to risk-based capital requirements. Because it does not differentiate assets according to risk, the previous calibration could make low-risk but balance-sheet-intensive activities such as Treasury intermediation less attractive when the leverage requirement became binding.
The Federal Reserve, FDIC and OCC addressed that issue through their November 2025 final eSLR rule. For GSIB holding companies, the fixed 2% eSLR buffer was replaced with a buffer equal to 50% of each firm’s method-1 GSIB surcharge. For covered depository institutions, the new buffer is also tied to the parent’s method-1 surcharge but is capped at 1%. The rule became effective April 1, 2026, with early adoption permitted from January 1.
Bowman said seven of the eight U.S. GSIBs adopted the revised standard early and cited estimates showing that the parent holding companies of six dealers gained nearly $5 trillion in aggregate eSLR headroom during the first quarter. She said the additional capacity allowed some dealer subsidiaries to expand Treasury holdings and other balance-sheet-intensive market-making activities.
The change fits into Bowman’s broader effort to revise large-bank regulation. Investozora recently reported that Bowman said the Fed’s bank stress-test overhaul was nearing finalization, another part of her push to change how regulatory capital requirements are calibrated and implemented.
Bowman’s earlier position has not changed
Bowman’s underlying position on the eSLR is consistent with what she said before the rule was adopted. In her June 2025 statement on the original eSLR proposal, Bowman argued that the requirement had become a binding constraint instead of a backstop and said recalibration would give large banks greater capacity to intermediate Treasuries during periods of stress.
The October speech therefore does not mark a policy shift. The new development is her claim that post-implementation evidence is beginning to show the mechanism she previously expected: greater regulatory headroom followed by larger Treasury positions among the dealers that had been most constrained.
There is an important qualification. In the Fed’s March 2026 Senior Financial Officer Survey, six of the eight U.S. GSIB respondents said the eSLR changes had produced no change in their institution’s or affiliated dealer’s repo activity, while two reported increased activity. Most also reported no change in reserve or other high-quality liquid-asset holdings.
That makes the supervisory position data Bowman cited particularly important to her case, but it also means the public survey does not show a uniform behavioral response across the eight institutions.
What the findings mean for the Treasury market
Bowman said the Fed is seeing narrower bid-ask spreads, lower intraday volatility around Treasury auctions, calmer funding conditions and greater price stability during periods of heavy supply. She also argued that expanded dealer capacity may reduce reliance on highly leveraged investors in the Treasury cash-futures basis trade.
Those statements are Bowman’s assessment, not a new Federal Reserve Board policy decision. Her speech explicitly states that the views are her own and are not necessarily those of other Board members or the Federal Open Market Committee.
The distinction also matters because the eSLR rule itself was already adopted jointly by the federal banking agencies in November 2025. Thursday’s development was not another regulatory change, but Bowman’s first detailed post-implementation case that the existing change is producing the Treasury-market benefits she had argued it would deliver.
For readers tracking the connection between bank balance-sheet capacity and government debt markets, Investozora’s explanation of how the federal funds rate and Treasury yields interact provides the broader monetary-policy context.
