FED announced a change to an interim final rule to bolster the effectiveness of the Paycheck Protection Program (PPP) of the Small Business Administration. The change will temporarily modify the FED rules to allow certain bank directors and shareholders to apply for PPP loans for their small businesses. The rule change becomes effective immediately and will be in place while the PPP is active. Comments on the interim final rule will be accepted for 45 days after publication in the Federal Register.
To prevent favoritism, FED rules limit the types and quantity of loans that bank directors, shareholders, officers, and businesses owned by these persons can receive from their related banks. These requirements have prevented some small business owners from accessing PPP loans—especially in rural areas. The Small Business Administration recently clarified that PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, subject to certain limits and without favoritism. This change will allow banks to make PPP loans to a broad range of small businesses within their communities, in line with the rules and restrictions of the Small Business Administration. The change only applies to PPP loans.
PPP was created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to facilitate lending to small businesses affected by COVID-19. Under PPP, qualified lenders, including many depository institutions subject to section 22(h) of the Federal Reserve Act and the Board’s Regulation O, may make loans to small businesses for payroll-related and other purposes specified in the CARES Act. Loans that meet the requirements for the PPP set forth by the Small Business Administration are guaranteed as to the unpaid principal and accrued interest of the loan. The guarantee for PPP loans provided by the Small Business Administration is backed by the full faith and credit of the United States. Only loans made between February 15, 2020 and June 30, 2020 are eligible for the PPP.
Keywords: Americas, US, Banking, Small Banking Administration, Paycheck Protection Program, COVID-19, Credit Risk, CARES Act, Regulatory Capital, FED
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleESMA Signs MoU on Use of Financial Benchmarks Regulated in Singapore
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.