How $4 trillion in Treasurys parked at banks could become a ticking time bomb if the debt-ceiling fight triggers a U.S. default

Mayra Rodriguez Valladares, a financial regulations expert and managing partner at MRV Associates, said any risk-weight change would hinge on how far U.S. credit ratings would drop following a default, but also that banks would have few good choices in that scenario.

“You can try to raise capital, which would be horrifying in the middle of a default, or you can try to jettison riskier assets like securitizations or other investments that require more capital,” Rodriguez Valladares said. “It is just uncharted territory.”

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