WASHINGTON The U.S. Securities and Exchange
Commission agreed on Wednesday to move forward with proposals
requiring the disclosure of bank loans and other private
financial deals entered into by municipal bond market issuers.
Borrowing by states, cities, schools and others through bank
loans and private placements have raised concerns that problems
with that debt could affect the prices of the issuers’ publicly
The amount of commercial bank loans to state and local
governments has more than doubled since the financial crisis,
increasing from $66.5 billion at the end of 2010 to $153 billion
by the end of 2015, according to the SEC.
The federal market regulator said the plan would add the
undertaking of these borrowings to the list of material events
that should be disclosed.
In addition, any related actions – such as defaults or loan
term modifications that would indicate financial difficulties on
the part of the muni issuer – would be subject to disclosure.
Municipal brokers, dealers and underwriters would be
required to ensure that issuers disclose this information to the
Municipal Securities Rulemaking Board within 10 business days of
Currently, such disclosure by issuers is voluntary.
The SEC said it will seek public comment on the proposal
before taking its final action.
The National Federation of Municipal Analysts in August
urged the SEC and Congress to improve muni market disclosure
citing bank loans.
The group noted that “failure to publicly disclose bank
loans to all market participants can lead to unexpected rating
changes that negatively impact bond pricing.”
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