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    US Agencies Finalize Interim Final Rules Issued Amid Pandemic

    October 29, 2020

    US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year. One of the final rules temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions. This final rule will become effective on its publication in the Federal Register and will expire on December 31, 2020. Another final rule neutralizes—due to the lack of credit and market risks—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities. The effective date for this final rule is December 28, 2020.

    Final Rule on Real Estate Appraisals

    The final rule temporarily deferring appraisal and evaluation requirements is substantially similar to the interim final rule issued in April 2020. The final rule adopts deferral of the requirement to obtain an appraisal or evaluation for up to 120 days following the closing of certain residential and commercial real estate transactions, excluding transactions for acquisition, development, and construction of real estate. The final rule makes one revision to the interim final rule. In response to the comments received on the interim final rule, the final rule clarifies that transactions for the acquisition, development, and construction of real estate excluded from the 120-day deferral period mean, for purposes of this rule, the loans that are described in the Call Report Instructions for Schedule RC-C, “Loans and Lease Financing Receivables,” Part I, "Loans and Leases," item 1.a, “Construction, land development, and other land loans.” 

    Final Rule on Treatment of Certain Emergency Facilities in Regulatory Capital and Liquidity Coverage Ratio (LCR) Rules

    US Agencies are adopting the revisions made to the regulatory capital rule and the LCR rule under three interim final rules published in March, April, and May 2020. The agencies are adopting these interim final rules as final with no changes. Under this final rule, banking organizations may continue to neutralize the regulatory capital effects of participating in the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF) and are required to continue to neutralize the LCR effects of participating in the MMLF and the PPPLF. In addition, Paycheck Protection Program loans will receive a zero percent risk-weight under the agencies’ regulatory capital rules. The final rule will support the flow of credit to households and businesses affected by the coronavirus event. 

    In connection with the interim final rules, FED temporarily revised the financial statements for holding companies (FR Y-9 reports) and the complex institution liquidity monitoring report (FR 2052a); it also invited comment on proposals to revise and extend these collections of information for three years. FED has extended the FR Y-9 and FR 2052a for three years, with revision, as originally proposed. Additionally, in connection with the interim final rules, the agencies made revisions to the call reports, the report of assets and liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002), and the regulatory capital reporting for institutions subject to the advanced capital adequacy framework (FFIEC 101). The changes to the call reports, FFIEC 002, and FFIEC 101 and their related instructions have been addressed in a separate Federal Register notice.

     

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    Effective Date: FR Publication Date/December 28, 2020

    Keywords: Americas, US, Banking, Securities, COVID-19, Real Estate Appraisals, Credit Risk, Residential Real Estate, MMLS, Paycheck Protection Program, LCR, Regulatory Capital, Reporting, FR Y-9C, FR 2052A, Call Reports, Basel, US Agencies

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