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by pphysch 1203 days ago
> Banks are required by law to buy US Treasuries (UST). This regulation came about after the GFC.

Can you expand on this? What is this regulation titled?

1 comments

Banks are required to have reserves. Reserves are mostly held as US Treasuries.
Aren't bank reserves normally cash (or equivalently central bank deposits)?
Gotcha.
Post GFC, regulators started assigning risk weightings to bank assets — cash and treasury bills are “riskless” by this metric, most other things aren’t. So if you need $100 of reserves, that can be $100 of treasuries or $200 of car loans or $400 of mortgage backed securities. For obvious reasons, their balance sheets are heavily invested in treasuries now.

https://www.investopedia.com/terms/t/tier-1-capital-ratio.as...