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August 22, 2018

US Agencies (FDIC, FED, and OCC) issued an interim final rule amending the liquidity rules to treat certain eligible municipal securities as high-quality liquid assets (HQLAs), as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCP Act). This interim final rule takes effect on publication in the Federal Register and comments will be accepted for 30 days after its publication in the Federal Register.

The interim final rule amends the agencies' liquidity coverage ratio (LCR) rule to treat liquid and readily-marketable, investment-grade municipal obligations as HQLAs. The EGRRCP Act requires the agencies to treat a municipal obligation as a HQLA under their liquidity coverage ratio rules if that obligation is considered “liquid and readily-marketable” and “investment grade.” Pursuant to Section 403 of the EGRRCP Act, the interim final rule amends the LCR rule as follows:

  • Adds municipal obligations that are liquid and readily-marketable and investment grade under 12 CFR part 1, as of the LCR calculation date, to the list of assets eligible for treatment as level 2B liquid assets
  • Adds a definition for "municipal obligations," which means an obligation of (1) a state or any political subdivision thereof or (2) any agency or instrumentality of a state or any political subdivision thereof
  • Adds a reference to the FED's definition of liquid and readily-marketable in 12 CFR 249.3 to the definition of "liquid and readily-marketable"

The LCR rule and this interim final rule are applicable to depository institutions with USD 10 billion or more in total consolidated assets that are consolidated subsidiaries of internationally active banking organizations, with total consolidated assets of USD 250 billion or more or that have USD 10 billion or more in foreign exposures.

 

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Comment Due Date: FR + 30 Days

Effective Date: FR Date

Keywords: Americas, US, Banking, HQLA, EGRRCP Act, LCR, Municipal Securities, US Agencies

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