Financial Institution Letters
April 9, 2020
Changes to the Regulatory Capital Rule to Accommodate the Paycheck Protection Program
The Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System (Federal Reserve), and Office of the Comptroller of the Currency (together, the agencies) issued an interim final rule on April 7, 2020, that allows banking organizations to neutralize the regulatory capital effects of participating in the Federal Reserve's Paycheck Protection Program Lending Facility (PPPL Facility). Through the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse loans to eligible lenders, including depository institutions, to fund loans under the Paycheck Protection Program.
Statement of Applicability: The interim final rule is applicable to all FDIC-supervised institutions.
- In order to provide liquidity to small business lenders and the broader credit markets, and to help stabilize the financial system, the Federal Reserve authorized the Federal Reserve Banks to establish the PPPL Facility.
- Through the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse loans to eligible lenders, including depository institutions, to fund loans under the Paycheck Protection Program.
- Under the Paycheck Protection Program, the Small Business Administration guarantees certain loans made by eligible lenders to small businesses, as provided by the Coronavirus Aid, Relief, and Economic Security Act.
- To support the use of the PPPL Facility, the agencies are allowing banking organizations to exclude loans pledged as collateral to the PPPL Facility from a banking organization's total leverage exposure, average total consolidated assets, advanced approaches total risk-weighted assets, and standardized total risk-weighted assets, as applicable.
- In addition, loans made under the Payment Protection Program receive a zero percent risk weight under the agencies' regulatory capital rules regardless of whether they are pledged as collateral to the PPPL Facility. However, such loans will be included in a banking organization's leverage ratio requirement unless they are pledged as collateral to the PPPL Facility.
- The interim final rule is effective as of the date of Federal Register publication. Comments will be accepted for 30 days after publication in the Federal Register.
- FDIC-Supervised Institutions
- Chief Executive Officer
- Chief Financial Officer
- Chief Risk Officer
- Risk-Based Capital Rules, 12 CFR Part 324
- Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans
- Ben Bosco, Chief, Capital Policy, (202) 898-6853 or email@example.com
- Noah Cuttler, Senior Policy Analyst, (202) 898-3556 or firstname.lastname@example.org
- email@example.com or (202) 898-6888
Paper copies of FDIC FILs may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).