Federal Reserve Board Amends Liquidity Coverage Ratio Rule to Include Certain Municipal Obligations (Fed. Reg.)

The Board of Governors of the Federal Reserve System ("FRB") adopted a final rule that adds certain general obligation U.S. municipal bonds to the range of securities that qualify as high-quality liquid assets ("HQLA"). The final rule was published in the Federal Register and applies to all institutions subject to the Liquidity Coverage Ratio ("LCR") rule.

The amended rule treats investment-grade general obligation U.S. municipal securities as HQLA up to certain levels when they meet the same liquidity criteria that apply currently to corporate debt securities. The Board stated that the limits on the amount of a qualifying municipality's bonds are based on the specific liquidity characteristics of those bonds.

The final rule will become effective on July 1, 2016.