Reducing leverage at banks will make the $4.6tn “repo” market – an important source of funding for the sector – smaller and correspondingly more expensive. Such is the latest worry about the litany of regulations meant to reduce risk at banks.

Banks use repurchase agreements to obtain cash loans by pledging securities as collateral. Hedge funds and other market participants use repos to speculate. The market has already contracted since the financial crisis and, according to Barclays research, could decline another 10 per cent or more if recent proposals for stricter capital requirements on banks go through.

Capital ratios that weigh assets according to riskiness are thought to invite manipulation by banks, so regulators have turned their attention to simple leverage ratios. These measure equity against total assets, without taking riskiness into account. Proposals include raising the leverage ratio minimum for systemically important US banks, and changing the way it is calculated. The concern is that this would encourage banks to reduce low risk, low return assets rather than finance them with costly equity. Repos fall into that camp because they typically use US Treasuries or agency mortgage