FED Updates Relief Measures to Address Impact of COVID-19 Pandemic
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
Related Links
- 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
Featured Experts
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
EBA Consults on Standards for Non-Modellable Risks Under FRTBRelated Articles
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
HKMA Endorses Industry Guidance to Support LIBOR Transition
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
OCC Issues Booklet on Supervision of Problem Banks
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.
