Regulatory spillover: Evidence from classifying municipal bonds as high-quality liquid assets

Regulatory spillover: Evidence from classifying municipal bonds as high-quality liquid assets

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Regulatory spillover: Evidence from classifying municipal bonds as high-quality liquid assets

This working paper by Jacob Ott investigates the "regulatory spillover" effects caused by the Federal Reserve's 2014-2015 policy shift regarding the Liquidity Coverage Ratio (LCR). The LCR, a cornerstone of post-2008 Basel III banking supervision, requires banks to hold sufficient high-quality liquid assets (HQLA) to survive a 30-day stress period. Initially, U.S.

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