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Found The Hole in New Bank Regulation
Come August they will be able to Shift long-term Municipal bonds to used as being high-quality liquid assets (HQLAs) that can be readily converted into cash?
This is nothing but a bookkeeping trick to put a false bottom in stress testing the larger banks since even the smaller ones are now exempt from stress testing already!
What a joke our Congress and regulatory laws have become now with banking! And it all coming in August 2018. The cities and counties on the edge of bankruptcy is the the Black -swan event? How about massive tax hikes of ~30% or a slight 76,121% increase in worker pension contributions in Honolulu...https://tinyurl.com/yd2d7gze
serf
https://tinyurl.com/ybefuwjq
The liquidity coverage ratio rule (LCR Rule), banking organizations are required to hold specified amounts of high quality liquid assets (HQLAs) that can be readily converted into cash in period of financial stress based on elaborate calculations of near-term liabilities. The initial LCR Rule did not include any US municipal securities as HQLAs, and in April 2016, the Federal Reserve Board issued regulations classifying some but not all US municipal securities as HQLAs. Section 403 of the Economic Growth Act now requires the federal banking agencies to amend the LCR Rule by August 2018 to classify all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets. This change now makes municipal bonds more attractive to covered banks, due to the high-quality treatment and the tax-exempt benefits.
This is nothing but a bookkeeping trick to put a false bottom in stress testing the larger banks since even the smaller ones are now exempt from stress testing already!
What a joke our Congress and regulatory laws have become now with banking! And it all coming in August 2018. The cities and counties on the edge of bankruptcy is the the Black -swan event? How about massive tax hikes of ~30% or a slight 76,121% increase in worker pension contributions in Honolulu...https://tinyurl.com/yd2d7gze
serf
https://tinyurl.com/ybefuwjq
The liquidity coverage ratio rule (LCR Rule), banking organizations are required to hold specified amounts of high quality liquid assets (HQLAs) that can be readily converted into cash in period of financial stress based on elaborate calculations of near-term liabilities. The initial LCR Rule did not include any US municipal securities as HQLAs, and in April 2016, the Federal Reserve Board issued regulations classifying some but not all US municipal securities as HQLAs. Section 403 of the Economic Growth Act now requires the federal banking agencies to amend the LCR Rule by August 2018 to classify all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets. This change now makes municipal bonds more attractive to covered banks, due to the high-quality treatment and the tax-exempt benefits.