Final rule issued on large-bank LCR

The Federal Reserve Board has finalized a rule that will expand the range of assets large banking organizations may use to satisfy regulatory liquidity coverage ratio ("LCR") requirements designed to ensure that these banking organizations have the capacity to meet their liquidity needs during a period of financial stress. The final rule allows investment-grade, U.S. general obligation state and municipal securities to be counted as high-quality liquid assets (HQLA) up to certain levels if they meet the same liquidity criteria that currently apply to corporate debt securities. The limits on the amount of a state's or municipality's securities that could qualify are based on the liquidity characteristics of the securities. The final rule, which will be effective on July 1, 2016, applies only to institutions supervised by the Federal Reserve and subject to the LCR requirement:

• Bank holding companies, certain savings and loan holding companies, and state member banks with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposure;
• state member banks with $10 billion or more in total consolidated assets that are subsidiaries of the above entities;
• nonbank financial companies designated by the Financial Stability Oversight Council for Board supervision, to which the Board has applied the LCR requirement by separate rule or order; and
• bank holding companies and certain savings and loan holding companies with $50 billion or more in total consolidated assets, to which a less stringent LCR applies.

Community banks are not subject to the LCR requirement.
Update: Published 4/11/16, 81 FR 21223