Federal Bank Regulators Issue Interim Final Rule for Paycheck Protection Program Facility

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The OCC, the Board of Governors of the Federal Reserve System (the Board), and the FDIC (together, the Agencies) issued an interim final rule (Interim Final Rule), effective immediately, to facilitate participation in the newly authorized Paycheck Protection Program Lending Facility (PPPL Facility).

The Board authorized participation by Federal Reserve Banks in the PPPL Facility to provide liquidity to the Federal Reserve Banks extending non-recourse loans to financial institutions funding loans under the Paycheck Protection Program (PPP) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  The PPP covered loans will be pledged as collateral to the Federal Reserve Banks.

To facilitate participation in the PPPL by depository institutions subject to the Agencies’ capital rules, the Interim Final Rule excludes the pledged PPP covered loans from regulatory capital requirements, which require a banking organization to apply a zero percent risk weight to the portion of exposures guaranteed by a government agency

The Interim Rule also implements the mandate under the CARES Act that loans originated under the PPP receive a zero percent risk weight under the Agencies’ regulatory capital rule.

Comments to the Interim Final Rule must be received on or before a date thirty days after publication in the Federal Register.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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