The Federal Reserve has issued its final rule counting certain municipal securities as high-quality liquid assets under the Liquidity Coverage Ratio – a step ABA has long advocated. In finalizing the rule, the Fed further expanded the ability of state and municipal bonds to count as HQLA securities insured by a bond insurer provided the underlying security would qualify as HQLA without insurance.
Due to the role banks play as investors in municipal markets, the proposed expansion of the HQLA definition is expected to be beneficial for all banks – not just those covered by the LCR.
Read the final rule.
Read ABA's comment letter.