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Financial Institution Letter

Final Rule Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Liquidity Facility, and the Money Market Mutual Fund Liquidity Facility

June 22, 2020  |  FIL-63-2020

Summary:

On June 22, 2020, the FDIC Board of Directors authorized publication of 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 the Board of Governors of the Federal Reserve System. To ensure that the changes are applied to assessments starting in the second quarter of 2020, the final rule will be effective immediately upon publication in the Federal Register with an application date of April 1, 2020.

Statement of Applicability to Institutions with Total Assets under $1 Billion: The final rule is applicable to all FDIC-insured institutions.

Highlights:

  • Under the final rule, the FDIC will mitigate the deposit insurance assessment effects of participating in the PPP, PPPLF, and MMLF.
  • Absent a change to the assessment rules, an insured depository institution (IDI) that participates in the PPP, PPPLF, or MMLF programs could be subject to increased deposit insurance assessments.
  • The final rule: 1) removes the effect of participation in the PPP and borrowings under the PPPLF on various risk measures used to calculate an IDI’s assessment rate, 2) removes the effect of participation in the PPP and MMLF on certain adjustments to an IDI’s assessment rate, 3) provides an offset to an IDI’s assessment for the increase to its assessment base attributable to participation in the PPP and MMLF, and 4) removes the effect of participation in the PPP and MMLF when classifying IDIs as small, large, or highly complex for assessment purposes.
  • To ensure that the changes are applied to assessments starting in the second quarter of 2020, the final rule will be effective immediately upon publication in the Federal Register with an application date of April 1, 2020.
  • The FDIC will apply the modifications under the final rule in calculating an institution’s deposit insurance assessment based on items IDIs will report on the Consolidated Report of Condition and Income or the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, as applicable, beginning as of June 30, 2020.

Distribution:

All FDIC-insured Institutions

Suggested Routing:

Chief Executive Officer
Chief Financial Officer
Call Report Preparer

Related Topics:

Assessments, 12 CFR Part 327

Attachments: