The Bond Buyer Op-Ed: Rightsizing the Regulation of Infrastructure Debt

The following Op-Ed was originally published in The Bond Buyer on May 17, 2018.

Congress appears poised to pass financial regulation reform legislation (S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act) that would, among other changes, require federal bank regulators to treat many investment-grade municipal securities as “High Quality Liquid Assets” (HQLA) for the purpose of the agencies’ Liquidity Coverage Ratio (LCR) rules.

Congress’ action will come more than three years after the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. finalized three nearly identical rules that excluded municipal securities from the HQLA definition. It comes more than two years after the Federal Reserve, acting alone, approved largely ineffective amendments to its LCR rule designed to permit a subset of municipal securities to count as HQLA, ineffective in part because the Fed excluded revenue bonds from HQLA treatment.

Why did the agencies exclude municipal securities from their HQLA definitions? Why will it have taken an act of Congress to budge the agencies on this issue?

Read the full article on The Bond Buyer website.

See also: SIFMA’s Infrastructure Finance Resource Center