The Federal Reserve on Friday declined to extend a pandemic-era rule that relaxed the amount of capital banks had to maintain against Treasurys and other holdings, in a move that could upset Wall Street and the bond market.
In a brief announcement, the Fed said it would allow a change to the supplementary leverage ratio to expire March 31. The initial move, announced April 1, 2020, allowed banks to exclude Treasurys and deposits with Fed banks from the calculation of the leverage ratio.
The decision to relax the capital requirements has been widely viewed as key to calming what had been tumultuous Treasury markets in the early days of the Covid-19 pandemic. A need for cash had caused a…