Maloney dissatisfied with OCC refusal to budge on municipal bond liquidity rule, will support legislative fix

Apr 23, 2015
Press Release

WASHINGTON – Congresswoman Carolyn B. Maloney (D-NY), a senior member of the House Financial Service Committee, is “disappointed that the OCC continues to insist corporate bonds should receive preferential treatment over municipal bonds.”

During today’s hearing of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Maloney questioned the Office of the Comptroller of the Currency’s (OCC) decision to treat corporate bonds and municipal bonds that have the exact same size, maturity, and liquidity differently. Under the current rule, the corporate bond would be considered a “high-quality liquid asset,” but the municipal bond wouldn’t — even when they have the same liquidity.

“The OCC established liquidity metrics for corporate bonds, so that if a corporate bond meets all of the metrics, then it can be included in the liquidity buffer, but for some reason, the same deal was not extended to municipal bonds,” said Maloney. “It’s my understanding that the Fed has already recognized this inconsistency, and is working on a proposal to establish liquidity metrics for municipal bonds — but the OCC is still refusing to consider giving relief to even the most liquid municipal bonds."

Maloney plans to introduce legislation soon with Representative Luke Messer that would require investment grade municipal bonds to be included in banks’ liquidity buffers. The Congresswoman wrote regulators last April, along with 14 other members of the New York Congressional Delegation, criticizing the proposed rule’s unfair treatment of municipal bonds.