COVID-19 UPDATES
Final Edition of COVID-19 Updates
This issue of IBA COVID-19 Updates is the final edition of a series, which IBA initiated in April in response to the pandemic. Future updates about COVID-19 will continue to appear in IBA E-News, distributed each Friday. Beginning Tuesday, Oct. 6, member bank presidents and CEOs can expect to see a new weekly IBA email publication, “Tuesday Toplines,” outlining the hottest topics of the week from IBA president and CEO Amber Van Til.
Acknowledging Systemic Risk, FSOC Endorses Plan to Raise Fannie, Freddie Capital
While not going so far as to designate the government-sponsored enterprises as systemically important financial institutions, the Financial Stability Oversight Council on Friday unanimously endorsed the Federal Housing Finance Agency’s plan to rebuild Fannie Mae’s and Freddie Mac’s capital levels. FHFA Director Mark Calabria called FSOC’s action “historic.”
Based on its recent review of the secondary market, FSOC warned that the companies’ current capital levels pose risks to financial stability if not properly mitigated. To address this issue, FSOC urged FHFA to implement capital definitions similar to those for U.S. banking organizations, avoid market distortions that could result from lower credit risk requirements for the GSEs and consider the merits of alternative approaches to calibrate capital.
GOP Urges Regulators to Exempt PPP Loans From Asset-Based Calculations
A group of House Republicans, including Indiana Congressman Trey Hollingsworth, last week called on the regulatory agencies to exclude SBA Paycheck Protection Program loans from asset-based regulatory thresholds, deposit insurance premiums and other regulatory requirements.
Because of the complexity of the forgiveness process, lenders have had to hold PPP loans on their balance sheets for longer than anticipated, and many are now running up against asset-based regulatory thresholds and could be subject to regulatory action as a result, the lawmakers noted.
“Depository institutions have done an admirable job with administering PPP, a program which has saved more than 51 million American jobs,” they wrote. “We do not believe banks and credit unions should face increased, potentially costly regulatory scrutiny as a consequence of assisting with the implementation of an emergency economic relief program. Furthermore, given that PPP loans are guaranteed by SBA, PPP loans are not designed to present credit risk to participating lenders.”
Action Alert: Urge Congress to Pass a Standalone PPP Forgiveness Bill
The IBA is joining with the American Bankers Association and Independent Community Bankers of America to urge members of Congress to pass a standalone Paycheck Protection Program forgiveness bill before they break for recess. Legislators still have time to take action on existing PPP forgiveness bills (S. 4117 and H.R. 7777), but negotiations were stalled due to broader pandemic relief package discussion. Meanwhile, small businesses continue to struggle while they wait for clarity on PPP forgiveness. Relief for small businesses should not be held up because of differences over a larger pandemic relief package. PPP forgiveness legislation (S. 4117 and H.R. 7777) already has bipartisan support and could be passed on its own. Contact your lawmakers today and urge them to pass standalone PPP forgiveness legislation.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.