MSRB Encourages Voluntary Disclosure of Bank Loans by State and Local Governments

Date: April 3, 2012

Contact: Jennifer A. Galloway, Chief Communications Officer
             (703) 797-6600


Alexandria, VA - The Municipal Securities Rulemaking Board today encouraged state and local governments that issue municipal securities to make information about their bank loan financings publicly available on the MSRB’s Electronic Municipal Market Access (EMMA®) website. In doing so, state and local governments would provide timely access for investors and other market participants to key information useful in making informed investment decisions. 

The increased use by state and local governments of bank loans to meet funding needs has raised concerns among regulators and market participants about the amount of information available about such loans. Because bank loans generally do not require the same level of disclosure as public offerings for municipal securities, municipal bond investors and potential investors may not become aware of bank loans incurred by a state or local government or the impact of those loans on the municipal government’s outstanding debt until the release of its audited financial statements. For example, investors currently do not have easy access to terms and conditions of a bank loan that may require the acceleration of debt repayment if the borrower encounters financial stress, or terms of the bank loan that create a parity or senior position with the issuer’s other outstanding debt, which could negatively affect bondholders. 

The MSRB believes that the availability of timely information about bank loan financings is important for market transparency and promoting a fair and efficient market. Voluntary submission of information concerning bank loan financings through EMMA would provide timely access for bondholders, potential investors and other market participants to key information useful in assessing their current holdings of municipal securities or in making investment decisions regarding potential transactions in municipal securities.  

The MSRB encourages state and local governments that wish to provide disclosure, on a voluntary basis, to the marketplace regarding their bank loan financings to utilize EMMA to do so. The EMMA system is currently set up to collect other disclosures from state and local governments about their outstanding bonds and other securities, and provides a convenient vehicle for making bank loan information available to investors.

The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.