FED Expands Access to Paycheck Protection Program Liquidity Facility
FED announced that it has expanded access to the Paycheck Protection Program Liquidity Facility, also known as PPPLF, and expanded the collateral that can be pledged. On April 09, 2020, certain US agencies, including FED, had issued an interim final rule to allow banking organizations to neutralize the effect of PPP loans financed under the liquidity facility. Under section 1102 of the CARES Act, a PPP Loan will be assigned a risk-weight of zero percent under the risk-based capital rules of the federal banking agencies. FED also announced expansion to the scope and eligibility for the Main Street Lending Program, which was developed to help credit flow to small and medium-size businesses that were in sound financial condition before the pandemic.
The recent expansion of access to PPPLF will facilitate lending to small businesses via the Paycheck Protection Program (PPP) of the Small Business Administration (SBA). As a result of the changes, all PPP lenders approved by SBA, including non-depository institution lenders, are now eligible to participate in this liquidity facility. SBA-qualified PPP lenders include banks, credit unions, Community Development Financial Institutions, members of the Farm Credit System, small business lending companies licensed by the SBA, and some financial technology firms. When the PPPLF was announced, FED said the facility would immediately lend to depository institutions and that non-depository institutions would be added as soon as possible.
Additionally, eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF. An institution that pledges a purchased PPP loan will need to provide FED with documentation from the SBA demonstrating that the pledging institution is the beneficiary of the SBA guarantee for the loan. The SBA's PPP guarantees loans from qualified lenders to small businesses so that those businesses can keep workers employed. The PPPLF supports the PPP by extending credit to financial institutions that make or purchase PPP loans, using the loans as collateral. The additional liquidity from the PPPLF increases the capacity of financial institutions to make additional PPP loans.
Moreover, as part of the expansion to the scope and eligibility for the Main Street Lending Program, FED decided to expand the loan options available to businesses and increased the maximum size of businesses that are eligible for support under the program. The changes include:
- Creating a third loan option, with increased risk-sharing by lenders for borrowers with greater leverage
- Lowering the minimum loan size for certain loans to USD 500,000
- Expanding the pool of businesses eligible to borrow
Related Links
- Press Release on Liquidity Facility
- PPPL Facility Term Sheet (PDF)
- Rule on Capital Treatment of PPP Loans
- Press Release on Main Street Lending Program
Keywords: Americas, US, Banking, COVID-19, Regulatory Capital, Paycheck Protection Program, Credit Risk, CARES Act, FED
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
EIOPA Defers Delivery Timeline for Advice on Solvency II ReviewRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
