FED announced that it is working to expand access to its Paycheck Protection Program Liquidity (PPPL) Facility for additional Small Business Administration-qualified lenders as soon as possible. This is being done to facilitate lending to small businesses via the Paycheck Protection Program (PPP) of the Small Business Administration. In addition, FED has announced temporary actions aimed at increasing the availability of intraday credit extended by Federal Reserve Banks on both a collateralized and uncollateralized basis. These temporary actions will be effective on their date of publication in the Federal Register and will expire on September 30, 2020. Finally, FED announced that it will report substantial amounts of information on a monthly basis for the liquidity and lending facilities using Coronavirus Aid, Relief, and Economic Security (CARES) Act funding.
Access to PPPL Facility
Small Business Administration-qualified PPP lenders include depository institutions, such as banks and credit unions, as well as non-depository institution lenders, such as some Community Development Financial Institutions. Currently, only depository institutions are eligible to participate in the PPPL Facility and over 1000 such institutions have already been approved to access the program. The PPPL Facility supports the PPP by extending credit to financial institutions that make PPP loans, using the loans as collateral. The additional liquidity from the PPPL Facility increases the capacity of financial institutions to make additional PPP loans.
Temporary Actions Aimed at Increasing Availability of Intraday Credit
In light of disruptions from the COVID-19 outbreak, depository institutions may face unanticipated intraday liquidity constraints and demands on collateral pledged to the Federal Reserve Banks. In response, FED is adjusting the manner in which the Federal Reserve Banks administer part II of the Policy on Payment System Risk (PSR policy). Specifically, FED is:
- Suspending uncollateralized intraday credit limits (net debit caps) and is waiving overdraft fees for institutions that are eligible for the primary credit program
- Permitting a streamlined procedure for secondary credit institutions to request collateralized intraday credit (max caps)
FED is suspending two collections of information that are used to calculate net debit caps. FED believes that these actions will not increase credit risk to the Federal Reserve Banks. These temporary actions are intended to support the provision of liquidity to households and businesses and to mitigate the disruptions from COVID-19 outbreak. A list of the frequently asked questions regarding this will be released shortly.
- Press Release on Access to PPPL Facility
- Press Release on Temporary Actions Related to Intraday Credit
- Policy Statement on Temporary Actions (PDF)
- Press Release on Information for Liquidity and Lending Facilities
Keywords: Americas, US, Banking, COVID-19, Paycheck Protection Program, Liquidity Facility, Intraday Credit, CARES Act, Federal Reserve Banks, FED
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