This bill would direct federal banking agencies to treat any municipal bond that is liquid, readily marketable, and investment grade as of the calculation date as a high-quality level 2A liquid asset. It seeks to mitigate the impact of a regulation that could prevent financial institutions from investing in municipal bonds, which would negatively impact funding for community infrastructure projects.
The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Comptroller of the Currency are directed to amend an existing liquidity risk measurement rule to comply with this legislation.
Municipal bonds can be issued by states, counties, or municipalities such as cities and towns to finance government spending. They are exempt from federal taxes for investors, and often from state and local taxes as well.