FED Updates Terms for Asset-Backed Securities Loan Facility
FED published additional information regarding borrower and collateral eligibility criteria for the Term Asset-Backed Securities Loan Facility (TALF). FED also outlined the information it will publicly disclose for the TALF and the Paycheck Protection Program Liquidity Facility (PPPLF) on a monthly basis. FED will disclose the name of each participant in both facilities; the amounts borrowed, interest rate charged, and value of pledged collateral; and the overall costs, revenues, and fees for each facility. The disclosures are similar to those announced in April for FED facilities that utilize CARES Act funds.
TALF was announced on March 23 as part of an initiative to support the flow of credit to U.S. consumers and businesses. This credit facility is intended to help meet the credit needs of consumers and businesses by facilitating the issuance of asset‐backed securities and improving the market conditions for asset‐backed securities. TALF will serve as a funding backstop to facilitate the issuance of eligible asset‐backed securities on or after March 23, 2020. Under the TALF, the Federal Reserve Bank of New York will commit to lend to a special purpose vehicle on a recourse basis. TALF will initially make up to USD 100 billion of loans available. The loans will have a term of three years; will be non-recourse to the borrower; and will be fully secured by eligible asset‐backed securities. No new credit extensions will be made after September 30, 2020, unless TALF is extended by FED and the Department of the Treasury.
Eligible collateral includes U.S. dollar denominated cash asset‐backed securities that have a credit rating in the highest long‐term or, if no long‐term rating is available, the highest short‐term investment‐grade rating category from at least two eligible nationally recognized statistical rating organization. It should not have a credit rating below the highest investment‐grade rating category from an eligible nationally recognized statistical rating organizations. With the exception of commercial mortgage‐backed securities, small business administration pool certificates, and Development Company Participation Certificates, eligible asset‐backed securities must be issued on or after March 23, 2020. To be eligible collateral, all or substantially all of the underlying credit exposures must be newly issued, except for commercial mortgage‐backed securities.
Eligible collateral must be asset‐backed securities where the underlying credit exposures are of auto loans and leases; student loans; credit card receivables (both consumer and corporate); equipment loans and leases; floor-plan loans; premium finance loans for property and casualty insurance; certain small business loans that are guaranteed by the small business administration; leveraged loans; or commercial mortgages.
Related Links
Keywords: Americas, US, Banking, Term Asset Backed Securities Loan Facility, TALF, PPPLF, CARES Act, Small Business Administration, Credit Risk, Asset Backed Securities, COVID-19, FED
Related Articles
HKMA Consults on Supervisory Policy for OTC Derivatives Transactions
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
PRA on Regulatory Capital and IFRS 9 Requirements for Payment Holidays
PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.
HKMA on Fintech Adoption and Innovation by Banks in Hong Kong
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB Consults on Guide for Managing Climate and Environmental Risks
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA Assesses Interlinkages Between Recovery and Resolution Planning
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB Publishes Final MREL Policy Under the Banking Package
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies Amend Interim Final Rule on Transition Period for CECL
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB Releases Results of March Survey on Credit Terms and Conditions
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.
