Comptroller issues bulletin on HQLA treatment under liquidity coverage ratio rule

Federal banking agencies’ recent final rule treating liquid and readily marketable, investment-grade municipal obligations as high-quality liquid assets (HQLA) under the liquidity coverage ratio (LCR) rule is noted in a bulletin issued Wednesday by the Office of the Comptroller of the Currency (OCC).

The final rule, adopted May 30 and also published Wednesday in the Federal Register, is scheduled to take effect July 5. Issued jointly by the OCC, the Federal Deposit Insurance Corp. (FDIC), and the Federal Reserve Board, the final rule was adopted without change from the interim final rule issued last August.

The final rule conforms with Section 403 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in May 2018. Section 403 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 OCC said in Bulletin 2019-27.

OCC Bulletin 2019-27

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