Liquidity Coverage Ratio Rule: Treatment of Certain Municipal Obligations as High-Quality Liquid Assets

Summary

The Office of the Comptroller of the Currency (OCC) published a final rule in the Federal Register on June 5, 2019, that adopts without change an interim final rule issued August 31, 2018. The final rule amends the liquidity coverage ratio (LCR) rule to treat liquid and readily marketable, investment grade municipal obligations as high-quality liquid assets (HQLA). The final rule was issued jointly with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (collectively, the agencies).

The effective date of the final rule is July 5, 2019.

Background

Section 403 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted May 24, 2018, requires the agencies, for purposes of the LCR rule and any other regulation that incorporates a definition of the term “high-quality liquid asset” or another substantially similar term, to treat a municipal obligation as an HQLA that is a level 2B liquid asset if that obligation is, as of a bank’s LCR calculation date, liquid and readily marketable and investment grade. The agencies published an interim final rule implementing section 403 on August 31, 2018.

This final rule adopts without change the interim final rule.

Further Information

Please contact Christopher McBride, Director; James Weinberger, Technical Expert; or Ang Middleton, Bank Examiner (Risk Specialist), Treasury and Market Risk Policy, at (202) 649-6360; or contact David Stankiewicz, Special Counsel; Henry Barkhausen, Counsel; Lee Walzer, Counsel; or Daniel Perez, Senior Attorney, Chief Counsel’s Office, at (202) 649-5490.

Jonathan V. Gould
Senior Deputy Comptroller and Chief Counsel

Related Link

• “Liquidity Coverage Ratio Rule: Treatment of Certain Municipal Obligations as High-Quality Liquid Assets” (PDF)