When the Office of the Comptroller of the Currency (the “OCC”), the Board of Governors of the Federal Reserve System (the “Board”) and the Federal Deposit Insurance Corporation (the “FDIC”) finalized the Liquidity Coverage Ratio (the “LCR”) in September 2014, they excluded municipal securities from qualifying as high-quality liquid assets (“HQLAs”) under the rule. However, the Board stated that it would continue to examine whether at least some U.S. municipal securities could be included as eligible HQLAs. On May 21, 2015, the Board invited public comment on a proposed rule that allows Board-supervised institutions that are subject to the LCR to count certain U.S. municipal securities as HQLAs, subject to limitations related to the amount outstanding of a particular issuance, the average daily trading volume of an issuer’s municipal securities and a cap on the amount of municipal securities that can count as HQLAs.

Application -

The proposed rule only applies to bank holding companies, certain savings and loan holding companies, state member banks and nonbank financial companies designated by the Financial Stability Oversight Council for Board supervision to which the Board has applied the LCR by rule or order. The proposed rule does not apply to OCC or FDIC regulated institutions, but as a practical matter, these institutions would benefit from the application of the proposed rule to their holding companies.