Supporting Municipal Securities as High Quality Liquid Assets

National Governors Association
U.S. Conference of Mayors
National Association of Counties
National League of Cities
National Conference of State Legislatures
National Association of State Treasurers
National Association of State Auditors, Comptrollers and Treasurers 
International City/County Management Association
American Public Power Association
National Association of Health and Higher Educational Facilities Authorities
Airports Council International – North America
The National Association of Towns and Townships
National Council of State Housing Agencies
Large Public Power Council
Government Finance Officers Association


RE: Request Cosponsorship of HR 1624, The Municipal Finance Support Act of 2017

Dear Congressman:

The undersigned organizations collectively represent tens of thousands of public sector entities that issue debt to finance and build the infrastructure that contributes to strong economies at the State and local levels across the United States. Together our members agree that legislation classifying Municipal Securities as High Quality Liquid Assets would keep demand for the municipal bond high, thus keeping the interest costs of issuance low. On behalf of the organizations listed above we request that you join as a cosponsor of HR 1624, legislation that directs the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) to classify all investment grade, liquid and readily marketable municipal securities as High Quality Liquid Assets (HQLA).

This important legislation is necessary to amend the 2014 Liquidity Coverage Ratio: Liquidity Risk Measurement Standards; Final Rule – 79 Fed. Reg. 61439.  While the rule established a minimum liquidity requirement for large banking organizations and identified acceptable investments – deemed HQLA – to meet this requirement, it failed to include municipal securities in any of the acceptable investment categories.  In doing so, regulators overlooked core features of these securities that are consistent with all of the criteria proposed by regulators to be characterized as HQLA, including limited price volatility, high trading volumes and deep and stable funding markets, as discussed below.

After U.S. Treasuries, municipal securities are the safest available investment, with state and local governments having nearly a zero default rate.  Yet the rule classifies foreign sovereign debt securities as HQLA while excluding investment grade municipal securities.  Not classifying municipal securities as HQLA will increase borrowing costs for state and local governments to finance public infrastructure projects, as banks will likely demand higher interest rates on yields on the purchase of municipal bonds or, during times of national economic stress, even forgo the purchase of municipal securities.  The resulting cost impacts for state and local governments could be significant as bank holdings of municipal securities and loans have more than doubled since 2009.1

With the American Society of Civil Engineers estimating a $2.1 trillion funding gap over the next ten years to meet our nation’s infrastructure needs, the ability of states and localities to finance infrastructure at the lowest possible cost is critical.  Classifying investment grade municipal securities as HQLA will help ensure low-cost infrastructure financing remains available for municipal securities issuers to continue to build the infrastructure for commerce, public safety, job creation and the development of an educated workforce that our communities and national economy rely on.  For these reasons we hope you will consider cosponsoring HR 1624.

Thank you for your consideration of this request.


Government Finance Officers Association, Emily Brock, 202-393-8467
National Governors Association, David Parkhurst, 202-624-5328
U.S. Conference of Mayors, Larry Jones, 202-861-6709
National Association of Counties, Jack Peterson, 202-661-8805
National League of Cities, Brett Bolton, 202-626-3183
National Conference of State Legislatures, Max Behlke, 202-412-3586
National Association of State Treasurers, Preston Weyland, 202-347-3863
National Association of State Auditors, Comptrollers and Treasurers, Cornelia Chebinou, 202-624-5451
International City/County Management Association, Elizabeth Kellar, 202-962-3611
American Public Power Association, John Godfrey, 202-467-2929
National Assn. of Health and Higher Educational Facilities Authorities, Chuck Samuels, 202-434-7211
Airports Council International – North America, Annie Russo, 202-293-8500
The National Association of Towns and Townships, Jennifer Imo, 202-261-3690
Large Public Power Council, Noreen Roche-Carter, 916-732-6509
National Council of State Housing Agencies, Garth Rieman, 202-624-7710



1. 2016 SIMFA Data.

2. American Society of Civil Engineers 2017 Infrastructure Report Card “Cumulative Infrastructure Needs by System Based on Current Trends”