Through an interim final rule, the Office of the Comptroller of the Currency, the Federal Reserve Board and the FDIC (collectively, the "agencies") amended the liquidity coverage ratio ("LCR") rule to treat liquid and readily marketable, investment-grade municipal obligations as high-quality liquid assets ("HQLA"). The interim rule will become effective upon publication in the Federal Register.
The agencies issued the interim rule to comply with the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which requires agencies to treat municipal obligations meeting certain standards as HQLA for the purpose of calculating the LCR. The interim final rule will also:
- expand the definition of "municipal obligations" to include the obligations of (i) "a state or any political subdivision thereof" or (ii) "any agency or instrumentality of a state or any political subdivision thereof"; and
- classify a "liquid and readily marketable" security as one that is traded in an active, secondary market with (i) "more than two committed market makers," (ii) "a large number of non-market maker participants on both the buying and selling sides of transactions," (iii) "timely and observable market prices," and (iv) "a high trading volume."
Comments on the interim rule must be submitted within 30 days of publication in the Federal Register.
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