The big fear is that some banks might resist lending because they might struggle putting more capital aside. Banks appear to be healthy, with $3.5 trillion in reserves and should be able to handle permanent changes to SLR.
Fed policymakers were concerned that expiration of the SLR exemption would trigger banks to stop buying Treasuries or accepting deposits which would send cash into the money markets. Some analysts were convinced the ending of the SLR exemption will wreak havoc in the repo markets. Repo financing however should see little impact on the Fed's decision to let the SLR expire because repos were not exempt at the holding company.
