FDIC approved a final rule that mitigates the deposit insurance assessment effects of participating in the Paycheck Protection Program (PPP) established by the U.S. Small Business Administration and the Paycheck Protection Program Liquidity Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF) established by FED. To ensure that the changes are applied to assessments starting in the second quarter of 2020, the final rule will be effective immediately on publication in the Federal Register, with an application date of April 01, 2020. The final rule affects the agencies’ current information collections for Call Reports FFIEC 031, FFIEC 041, and FFIEC 051. FDIC also published a statement from the Chairperson Jelena McWilliams on the final rule.
The PPP, PPPLF, and MMLF were put in place to provide financing to small businesses and liquidity to small business lenders and the broader credit markets, with the ultimate goal of helping to stabilize the financial system during this time of significant stress. The final rule is intended to ensure that banks will not be subject to significantly higher deposit insurance assessments for participating in these programs. The final rule:
- Removes the effect of participation in the PPP and borrowings under the PPPLF on various risk measures used to calculate an insured depository institution’s assessment rate
- Removes the effect of participation in the PPP and MMLF program on certain adjustments to an insured depository institution’s assessment rate
- Provides an offset to an insured depository institution’s assessment for the increase to its assessment base attributable to participation in the PPP and MMLF
- Removes the effect of participation in the PPP and MMLF when classifying insured depository institutions as small, large, or highly complex for assessment purposes
On May 20, 2020, FDIC proposed to mitigate the deposit insurance assessment effects of participating in the PPP, PPPLF, and MMLF programs. In response to the proposal, FDIC received 41 comment letters from depository institutions, depository institution holding companies, trade associations, and other interested parties. Respondents generally supported the proposal, but expressed concerns with certain aspects of the proposal. FDIC considered all comments received and has made some changes in the final rule, while clarified other aspects of the rule that remain unchanged from the proposed rule.
FDIC will apply the modifications under the final rule in calculating an institution’s deposit insurance assessment based on the items insured depository institution will report on the Call Reports or the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002), as applicable, beginning as of June 30, 2020. The changes to the Call Reports, the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, and their respective instructions have been addressed in a separate Federal Register notice or notices.
Effective Date: Date of Publication in FR
Keywords: Americas, US, Banking, COVID-19, Paycheck Protection Program, MMLF, PPPLF, Liquidity Facility, Credit Risk, Call Report, Insured Depository Institutions, FED, FDIC
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