The U.S. House of Representatives passed a bill to expand the ability of banks to treat municipal securities as high-quality liquid assets.
Under the Municipal Finance Support Act of 2017 (H.R. 1264), federal banking agencies would be required to amend liquidity coverage ratio rules (see 79 Fed. Reg. 61439 (Oct. 10, 2014)) to provide that municipal obligations that are "liquid," "readily marketable" and "investment grade" are no lower than "Level 2B liquid assets." Under the bill, a "municipal obligation" is defined to mean "an obligation of a State or political subdivision, or any agency or instrumentality thereof."
If passed, the bill would require the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the FDIC to implement the amendments to their liquidity rules within three months of the bill's enactment.
A substantially similar bill, S.828, was introduced in the Senate earlier this year. That measure is co-sponsored by a bipartisan group of eight Democrats and five Republicans.
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