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Monday, April 20, 2015

Press Reports: ABA-Advocated Liquidity Rule Tweak Coming Soon

According to press reports late last week, the Federal Reserve is expected to adjust the Liquidity Coverage Ratio to categorize some municipal bonds as high-quality liquid assets — a measure ABA has advocated for since the regulatory agencies first published the liquidity standards.

ABA’s American Bankers Council — representing mid-sized banks — most recently raised the issue last month during a meeting with all five Fed governors. News reports also indicated that the FDIC and OCC do not intend to follow the Fed’s move. ABA will continue its advocacy with these agencies, as well as with members of Congress pursuing a legislative solution.

Due to the role banks play as investors in municipal markets, the anticipated expansion of the HQLA definition to include some municipal securities would be beneficial for all banks — not just those covered by the LCR.

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