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ARTICLE · 29 MAY 2020

US Banking Regulators Modify Liquidity Coverage Ratio For COVID-19 Stimulus Effects

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On May 5, 2020, the US federal banking regulators adopted an interim final rule to modify the liquidity coverage ratio ("LCR") requirement to support banking organizations.

United StatesCoronavirus (COVID-19)
J. Paul Forrester
J. Paul Forrester
Jeffrey Taft
Jeffrey Taft
Matthew Bisanz
Matthew Bisanz
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On May 5, 2020, the US federal banking regulators adopted an interim final rule to modify the liquidity coverage ratio ("LCR") requirement to support banking organizations' participation in the Federal Reserve Board's Money Market Mutual Fund Liquidity Facility ("MMLF") and the Paycheck Protection Program Liquidity Facility ("PPPLF").1 The modification is effective immediately, but the regulators have requested comment on whether the modification should be expanded to other types of COVID-19-related stimulus facilities.

Background

In 2014, the US federal banking regulators, in order to implement the Basel capital requirements, adopted a final rule to impose a quantitative LCR requirement on larger US banking organizations.2 Under the LCR requirement, a larger US banking organization must maintain a sufficient amount of unencumbered high quality liquid assets to meet 100 percent of its projected total net cash outflows over a stressed 30-day period. A less

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