EGRRCPA change for liquidity coverage ratio (LCR) rule noted in OCC bulletin; interim rule took effect Aug. 31

A nearly month-old interim final rule that treats liquid, readily marketable, investment-grade municipal obligations as high-quality liquid assets (HQLA) – and which remains open for public comment until Oct. 1 – is noted in a bulletin issued Wednesday by the Office of the Comptroller of the Currency (OCC) to OCC-supervised institutions.

The interim rule, issued jointly by the OCC, Federal Reserve Board, and Federal Deposit Insurance Corp. (FDIC) and published in the Federal Register Aug. 31, implements section 403 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

Under section 403, the agencies – through the liquidity coverage ratio (LCR) rule and any other regulation that incorporates a definition of the term “high-quality liquid asset” or another substantially similar term – are required to treat a municipal obligation as HQLA and a level 2B liquid asset if that obligation is liquid and readily marketable and investment grade as of a bank’s LCR calculation date.

The agencies are looking for input, specifically, on how rule terms might be clarified. “Consistent with section 403, in what ways, if any, could the agencies clarify aspects of these provisions (e.g., by clarifying the terms ‘state’ or ‘political subdivision’)?” the agencies ask in the Aug. 31 F.R. notice. “The agencies invite comment on this question and all other aspects of this interim final rule.”

OCC Bulletin 2018-32

Federal Register notice

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