US muni treasurers warn LCR could crimp spending
Municipal bonds are not highly liquid. To some, that’s stating the obvious, but if US regulators write it into their version of Basel III’s liquidity coverage ratio, state and city treasurers say their financing costs will rise. By Joe Rennison
It may seem unlikely, but if the residents of Cary in North Carolina notice public verges becoming unkempt, or pilots using Boston's Logan International Airport start seeing potholes, there could be a single cause – a rule drawn up in Switzerland and implemented by the US Federal Reserve Board.
This rule is the liquidity coverage ratio (LCR). If last October’s Fed draft version is introduced unchanged, bonds issued by US states, cities and towns will not count towards the new liquidity buffers
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