Bowman says six big banks' parent companies gained nearly $5 trillion of room

Federal Reserve Vice Chair for Supervision Michelle Bowman said Thursday that a bank-capital change opened nearly $5 trillion of extra room in the first quarter at the parent companies of six dealers.

The figure is an estimate in a Federal Reserve research note that is not yet public, and she did not name the firms.

The room is spare capacity under a capital rule, not cash paid out and not bonds already bought. The rule, the enhanced supplementary leverage ratio, makes the biggest banks support their whole balance sheet with capital, including U.S. government debt. When it is tight, a bank has less space to own Treasuries or to finance them for clients.

Only a few of the largest U.S. banks, she said, had used that room to hold more Treasuries.

Treasury trading sits mainly in the broker-dealer, the unit that buys and sells securities, Governor Michael Barr said in his dissent on November 25, 2025, the day regulators finished the rule. The bulk of the capital cut, he said, lands at the bank that takes deposits.

He put that cut at 28%, or $219 billion, for the deposit-taking subsidiaries, against 1.4%, or $13 billion, at the holding companies of the eight U.S. banks regulators single out as a risk to the wider system, a wider set than the six.

The cut is capital the rules require, not the balance sheet the rules allow.

"If banks use up their excess capital in normal times, there will not be excess capital in stressful times," Barr said in that dissent.

Banks could adopt the change from January 1, 2026, and it became mandatory on April 1. Seven of those eight banks adopted it in the first quarter, so the early numbers already reflect the new rule.

A separate supervisory count she cited shows dealers' Treasury positions rising from roughly $600 billion at the start of the changeover to more than $700 billion at the end of April. She said the increase was concentrated at the firms that had kept the smallest cushion under the old rule for the previous two years.

One dealer she did not name said exposure across those eight banks rose by about $900 billion. She did not say how much of that was Treasuries.

Some banks, in a March 2026 survey of senior financial officers, said the change was a reason they held more Treasuries and made more short-term loans backed by them. She said the added holdings had likely absorbed positions hedge funds had largely held, and that dealers have more room to keep making markets when prices swing.

She announced no further change to the rule, and no new action in the Treasury market.

The 10-year Treasury yield touched 5.342% before dawn on Thursday, its highest since early 2002. When her remarks were delivered, around 3 p.m. Eastern time, it stood at 5.238%, down 5.4 basis points on the day.

ATLT, which holds Treasury bonds maturing in more than 20 years, fell to $76.76, its lowest in the past year, and traded at $77.64 in the afternoon, down 0.2% on the day.

Her count of dealer Treasury holdings stops on April 30, five months before that high.