Nutter Bank Report Special Edition: Lending Limit Relief for Massachusetts Banks Making PPP Loans

Nutter McClennen & Fish LLP

The Massachusetts Division of Banks has issued guidance that grants immediate supervisory relief to Massachusetts-chartered banks from statutory lending limits on loans to one borrower for loans made pursuant to the U.S. Small Business Administration’s (SBA’s) “Paycheck Protection Program” established by the Coronavirus Aid, Relief, and Economic Security Act. The guidance released on April 6, Industry Guidance Regarding U.S. Small Business Administration’s Paycheck Protection Program (PPP) and Legal Lending Limits for Massachusetts Chartered Banks and Credit Unions, clarifies that the Division will not consider loans made under the PPP as “the basis for an adverse regulatory finding or enforcement action for violation of the legal lending limit” by a Massachusetts-chartered bank. To the extent that a PPP loan is made as an exception to the bank’s own internal lending limits, established by the bank’s policies, the Division will also not criticize such an exception-to-policy loan in the findings of an examination, according to the new guidance. The Division cautioned banks that the supervisory exception to the legal lending limit announced in the new guidance has been granted specifically for loans made under the PPP, and only applies to the extent of the amount of any PPP loan. Click here for a copy of the Division’s new guidance to Massachusetts-chartered banks.

Nutter Notes: In its guidance, the Division also encouraged banks to consider collaborating with other lenders to meet small business demand for PPP loans. The guidance suggests that banks already engaged in processing PPP loans consider reaching out to other Massachusetts lenders that may have little to no SBA experience to pursue opportunities to extend access to the PPP, such as referral arrangements for PPP applicant

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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