Sens. Mike Rounds (R-S.D.), Mark Warner (D-Va.) and Chuck Schumer (D-N.Y.) have introduced an ABA-backed bill that would expand the ability of banks to count municipal securities as high-quality liquid assets under the Liquidity Coverage Ratio. The bipartisan bill is similar to a measure that sailed through the House earlier this year.
While the Federal Reserve this spring issued a rule counting certain municipal securities as HQLA — a step ABA has long advocated — the Senate measure would apply to all banking agencies. Due to the role banks play as investors in municipal markets, expansion of the HQLA definition is expected to be beneficial for all banks — not just those covered by the LCR.