HQLA Task Force

SFIG’s HQLA Task Force was formed to advocate for more reasonable liquidity treatment for high performing ABS and RMBS, potentially through a legislative approach.

In May 2018, SFIG hosted a roundtable for interested issuer members to identify potential criteria for ABS and RMBS to be considered high quality liquid assets (HQLA) under the liquidity coverage ratio (LCR).

The LCR was first introduced by the Basel Committee as a response to the perceived need to improve short-term resilience in the liquidity risk profiles of banking organizations. The goal of the rule is to make sure that banking entities retain enough HQLA in their portfolios to sustain a 30-day period of stress. LCR specifies what assets may qualify as HQLA and sets different levels of liquidity credit for different assets. Under this regulation, ABS is given no liquidity treatment, despite its performance during the financial crisis.

Congress granted HQLA treatment for certain municipal bonds in the recently passed regulatory relief law, thus opening up the prospect of liquidity treatment being determined based upon actual performance.

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