STATE GOVERNMENT RELATIONS
Indiana Board for Depositories Amends Collateral Rules
Last month the Indiana Board for Depositories met to amend the rules governing the current collateral requirements. Of significance was the adoption of the new rating system operated by FedFis and subsequent metrics for pledging requirements using the new systems rating structure.
The board also added new trigger and terminating events for lenders entering into and exiting pledging collateral. Depositories now have one quarter of preparation before being required to pledge collateral the following quarter if their FedFis ratings require it.
Additionally, the board changed a proposed rule that terminates a bank’s pledging requirements from four quarters down to two quarters of an improved rating above the required pledging threshold for 50% collateral. Banks that are required to pledge 100% collateral must adhere to a four-quarter period of improved ratings above threshold for requirement before the pledge requirement is released.
Indiana General Assembly Kicks off 2021 Legislative Session
This week marked the beginning of the 2021 legislative session. The ongoing pandemic not only makes this legislative session a unique one, but presents unique problems that the legislature will have to address.
Topics the legislature will consider include passage of a state budget, redrawing of legislative maps, recouping budget shortfalls due to economic disruption, and business liability immunity related to COVID-19, among many others.
The IBA Government Relations Team will be tracking these topics and others that impact the banking industry. Member updates will be provided throughout the session.
FEDERAL GOVERNMENT RELATIONS
Ask the Regulators: Basics of New Paycheck Protection Program Loan Programs
The Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, National Credit Union Administration and the Conference of State Bank Supervisors will host an interagency webinar on Monday, Jan. 11, at 2 p.m. ET.
Join officials from the Small Business Administration and Department of the Treasury for an overview of the new Paycheck Protection Program features associated with the recently passed Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. This presentation is open to all SBA lenders who participated in the SBA PPP lending program. During the webinar, SBA and Treasury will:
- Provide a timeline for the rollout of the new PPP programs;
- Provide an overview of the PPP loan programs, including first and second draw loans; and
- Discuss new forms and guidance.
A brief Q&A session will follow the presentation. Participants are encouraged to submit questions in advance via email to asktheregulators@stls.frb.org.
To accommodate as many PPP lenders as possible, institutions are asked to register no more than two representatives to attend the live session. Participants are also encouraged to use the webinar audio on their computers for the best experience.
New Details Released for Second Round of PPP
The SBA and Treasury Department have announced that the Paycheck Protection Program will reopen during the week of January 11 for new borrowers and certain existing PPP borrowers. Only community financial institutions will be able to make First Draw PPP Loans on Jan. 11 and Second Draw PPP Loans on Jan. 13. The PPP will open to all participating lenders shortly after.
Late Wednesday night the Small Business Administration released guidance and interim final rules to outline the second round of the Paycheck Protection Program. In the guidance, the SBA indicated that community financial institutions will be able to submit PPP loan applications at least two days before other lenders.
The window for community financial institutions is an effort to ensure businesses that need PPP funds most can get them. The new law noted that “PPP loans have been broadly distributed across diverse areas of the economy, with 27% of the funds going to low- and moderate-income communities, which is in proportion to their percentage of the population,” but it also reauthorized that PPP funds be set aside for specific pools, including for first-time PPP borrowers, very small businesses and small businesses in LMI neighborhoods, as well as for loans from community financial institutions.
The first interim final rule amends the existing PPP rules to reflect changes made by Congress, including changes on fees, borrower eligibility, loan amounts, eligible expenses, reliance on borrower certifications and loan increases, as well as a new registration requirement for all lenders. The SBA noted that “most of this document restates existing regulatory provisions to provide lenders and new PPP borrowers a single regulation to consult on borrower eligibility, lender eligibility and loan application and origination requirements, as well as general rules on increases and loan forgiveness for PPP loans.”
The second interim final rule governs second-draw loans that are now available for borrowers with 300 or fewer employees, that saw a 25% or greater revenue drop in 2020 compared to 2019 and that have used the full amounts of their first-draw PPP loans. The SBA declared that “Second-Draw PPP Loans are generally subject to the same terms, conditions and requirements as First-Draw PPP Loans.” The maximum loan amount is $2 million or two and a half months’ worth of average payroll costs, whichever is less. The rule covers several calculations to determine eligibility and loan amounts.
View the PPP Loan Access Guidance
View Interim Final Rule Amending PPP Rules
View Interim Final Rule on Second-Draw Loans
Eligible PPP Expenses Now Tax-Deductible
The Department of the Treasury and IRS have issued guidance allowing tax deductions for business expenses paid with PPP funds. The banking industry repeatedly called on Congress to explicitly provide for the tax deduction.
The stimulus law amended the CARES Act to indicate that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.
IRS Addresses EIP Processing Issue in Updated FAQs
The Internal Revenue Service has clarified that economic impact payment recipients who had their ACH payments erroneously sent to an account that is closed, inactive or temporary will not receive their payments and must instead claim the Recovery Rebate Credit when filing their 2020 tax returns electronically.
In an updated set of frequently asked questions, the IRS noted that eligible EIP recipients can check the status of their payment on the IRS’ Get My Payment tool, updated on Jan. 5. Individuals whose payments were sent to the wrong account will see “Payment Status #2 – Not Available.”
SBA No Longer Deducting EIDL Advances From PPP Loan Forgiveness
Pursuant to the COVID-19 relief law enacted last week, Small Business Administration staff has confirmed that Economic Injury Disaster Loan advances will no longer be deducted from Paycheck Protection Program loan forgiveness amounts. SBA’s API vendor updated its software on Dec. 29, according to the SBA. The agency expects to address retroactive payment of previously deducted EIDL advances in forthcoming guidance.
Congress Overturns Trump’s NDAA Veto, Enacting AML/BSA Reform
The House and Senate last week voted to overturn President Trump’s veto of the National Defense Authorization Act for fiscal year 2021. Passed in December, the now-enacted legislation includes several improvements to anti-money laundering rules.
Among other provisions, the law directs the Financial Crimes Enforcement Network to establish and maintain a national registry of beneficial ownership information that banks may in turn rely on when complying with customer due diligence requirements.
It also requires the Department of Justice to report on how law enforcement uses Bank Secrecy Act data; calls for the Department of the Treasury to review BSA reporting requirements with an eye toward streamlining them, including reviewing current thresholds; and provides for financial institutions to share BSA compliance resources, among other measures.
CSBS Files Complaint Against OCC Challenging Figure Bank Application
In late December, the Conference of State Bank Supervisors filed a complaint in federal court challenging the Office of the Comptroller of the Currency’s creation of a new special-purpose national bank charter for nonbank companies and the impending charter approval of fintech Figure Technologies Inc. The complaint is an extension of a 2017 lawsuit initiated by CSBS that argued OCC had gone beyond the authority granted to it by Congress under the National Bank Act and other federal banking laws in granting a bank charter to a nonbank.
“Figure is essentially the first applicant for the OCC’s fintech charter. Its plan to become a national bank without obtaining deposit insurance is an illegitimate attempt to evade the controversy surrounding the fintech charter and the federal court decision that invalidated it,” CSBS President and CEO John Ryan said.
The complaint adds that “the OCC consistently has attempted to circumvent the deposit insurance requirement for national banks by arguing that a national bank is required to obtain deposit insurance only if it is engaged in receiving deposits. To support the notion that deposit taking is not required to carry on the business of banking, the OCC has relied upon its own never-used (and recently invalidated) regulation, 12 C.F.R. 5.20(e)(1), which provides, without precedent or statutory basis that receiving deposits is not necessary to carry on the business of banking.”
OCC Proposes Tweaks to Requirements for Permissible Bank Premises
The Office of the Comptroller of the Currency has proposed changes to its current rules on national bank or federal savings association ownership of real property. The proposal will provide a set of general standards – including an occupancy test and excess capacity standards – that the OCC will use for determining whether the acquisition and holding of real estate is necessary for the transaction of an institution’s business.
The proposal defines bank-occupied office premises as those “containing offices where professional or clerical duties are performed” and “as real estate acquired and held in good faith in which more than 50% of each building or severable piece of land is used by bank persons, including facilities that may be operated by third parties to provide amenities and services to bank persons or otherwise facilitate bank business operations.” Comments on the proposal are due 45 days after publication in the Federal Register.
CFPB Task Force Backs Easing Credit Union Common-Bond Restrictions
A Consumer Financial Protection Bureau task force has recommended allowing more credit unions to serve underserved communities outside their common-bond membership.
As part of a wide-ranging report with roughly 100 recommendations on reforming consumer financial services law, the bureau’s Taskforce on Federal Consumer Financial Law reported that employment-based credit unions operating in areas that include underserved communities would like to expand their services to those communities.
While the report indicated that the task force “recognizes that credit unions are subsidized entities through their tax status as not-for-profit cooperatives,” it added that credit union charter type distinctions are “somewhat arbitrary” in demarcating among different classes of credit unions.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.