FED revised the term sheet and updated the frequently asked questions (FAQs) on Secondary Market Corporate Credit Facility (SMCCF), which will now begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. FED also announced that it will be seeking public feedback on a proposal to expand its Main Street Lending Program to provide access to credit for non-profit organizations. As with the existing Main Street Lending Program, which targets small and medium-size businesses, the proposed expansion would offer loans to small and medium-size non-profits that were in sound financial condition before the COVID-19 pandemic. Feedback may be submitted until June 22, 2020. Additionally, FED announced that it will resume examination activities for all banks, after previously announcing a reduced focus on the examination activity in light of the COVID-19 pandemic.
Updates on SMCCF. As detailed in the revised term sheet and the updated frequently asked questions (FAQs), the SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds. This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility's minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility's current purchases of exchange-traded funds. The Primary Market and Secondary Market Corporate Credit Facilities were established with the approval of the Treasury Secretary and with USD 75 billion in equity provided by the Treasury Department under the CARES Act.
Proposal to Expand Main Street Lending Program. Loan terms under the proposed Main Street non-profit loans, including the interest rate, the deferral of principal and interest payments, and the five-year term, are proposed to be the same as the terms for Main Street business loans. The minimum loan size is USD 250,000 while the maximum loan size is USD 300 million. Principal payments would be fully deferred for the first two years of the loan while interest payments would be deferred for one year. Two loan options would be offered under the proposal. Borrower eligibility requirements for the proposed non-profit facilities would be modified from the for-profit facilities to reflect the operational and accounting practices of the non-profit sector and include:
- Minimum of 50 and maximum of 15,000 employees
- Financial thresholds based on operating performance, liquidity, and ability to repay debt
- An operational history of at least five years
- A limit, of no more than USD 3 billion, on endowments
- Press Release on Updates to SMCCF
- Press Release on Proposal to Expand Main Street Lending Program
- Press Release on Resumption of Examination Activities for Banks
Comment Due Date: June 22, 2020
Keywords: Americas, US, Banking, COVID-19, SME, Main Street Lending Program, Corporate Credit Facility, SMCCF, Corporate Bonds, Credit Risk, FED
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.