Municipal bonds will no longer be part of the easily sellable assets that banks can use to show they are able to survive a credit crunch, Bloomberg reported, citing a person familiar with the matter.
The final liquidity rule will be approved by regulators, including the Federal Reserve, on Sept 3, the news service reported the person as saying.
The most recent draft does not list debt issued by states and municipalities as high-quality assets that could help sustain a bank through a 30-day squeeze, the report said, citing the person.
The Public Affairs Office of the Federal Reserve could not be reached out for comment outside of regular U.S. business hours.
The regulations could affect the municipal bond market by giving banks less incentive to buy bonds that finance schools, roads and public works, Bloomberg said.
(Reporting by Anjali Rao Koppala in Bangalore; Editing by Ken Wills)