GFOA Comments to Federal Agencies: Proposed Bank Liquidity Requirements Could Have Harmful Impacts

Tuesday, March 18, 2014

On January 31, 2014, the GFOA provided comments to three federal agencies about proposed regulations that could harm state and local government debt issuers. The proposal is intended to make banks more resilient and capable of weathering periods of fiscal stress without direct government intervention by requiring banks to maintain a designated level of high-quality liquid assets. As drafted, however, the proposal fails to classify municipal securities as high-quality liquid assets. The GFOA’s comment letter focuses on this oversight and expresses concern that the proposal would significantly reduce the appeal for banks of underwriting municipal securities, and the appeal of purchasing them, for investors.
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