The Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC (collectively, the "agencies") jointly adopted, without change, an interim final rule that modifies the agencies' liquidity coverage ratio ("LCR") rule to treat liquid and readily marketable, investment-grade municipal obligations as high-quality liquid assets ("HQLA"). The final rule expands 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."
As previously covered, 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 final rule will become effective 30 days following its publication in the Federal Register.
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