STATE GOVERNMENT RELATIONS
Indiana Legislative Session Continues
As the 2021 legislative session proceeds, the IBA Government Relations Team continues to represent industry views on banking-related legislation, including the following bills of importance.
House Bill 1377 – Bureau of Motor Vehicles
Author: Rep. Peggy Mayfield (R).
House Bill 1180 – Public Retirement Fund Investments
Author: Rep. Alan Morrison (R).
Senate Bill 364 – Grain Indemnity Fund
Author: Sen. Travis Holdman (R).
Senate Bill 214 – Low Income Housing
Author: Sen. Travis Holdman (R).
Senate Bill 197 – Criminal Law Issues
Author: Sen. Mike Young (R).
House Bill 1387 – Prohibited Expenditures and Investments
Author: Rep. Chris Judy (R).
Save the Date - Legislative Briefing - March 5
Join us for the virtual 2021 IBA Legislative Briefing, scheduled for March 5. We have transitioned our annual grassroots advocacy event to the safety of a virtual format, providing an opportunity for members to engage with Indiana lawmakers and discuss legislative issues important to the banking industry. Details and registration are forthcoming.
Save the Date - FLD Day at the Statehouse - April 9
The virtual IBA Future Leadership Division Day at the Statehouse is scheduled for April 9. This is an opportunity for emerging bank leaders to network with peers and learn more about grassroots advocacy and the legislative process. Details and registration are forthcoming.
FEDERAL GOVERNMENT RELATIONS
SBA Issues Procedural Notice on Addressing PPP Loan Error Codes
In response to recent reports of lenders receiving hold codes and compliance check error messages when submitting first- and second-draw Paycheck Protection Program loan applications, the Small Business Administration has issued a procedural notice with instructions for addressing these codes. Specifically, the procedures address second-draw PPP loan guaranty applications where there is a hold code on the borrower’s first-draw PPP loan, and first-draw PPP loan guaranty applications and second-draw PPP loan guaranty applications with compliance check error messages. The changes were scheduled to go live on the PPP loan portal on Feb. 11.
SBA outlined several methods lenders may use to resolve hold codes and compliance check error messages. Depending on the error code, the lender may resolve the code through a certification process, which involves collecting documentation and information from the borrower. In other instances described in the notice, hold codes may also be resolved through SBA review. The procedures also address how SBA will handle duplicate loans and other hold codes that cannot be resolved any other way.
OCC Releases Libor Transition Self-Assessment Tool
As banks prepare for the forthcoming cessation of the London Interbank Offered Rate, the Office of the Comptroller of the Currency has released a self-assessment tool for banks to evaluate their preparedness for transitioning away from Libor to an alternate reference rate, such as the Secured Overnight Financing Rate.
The tool can be used to determine the appropriateness of a bank’s transition plan and assess bank management’s execution of the transition plan, as well as oversight and reporting. The OCC noted that Libor transition plans should be risk-based and may not need to include all points included in the self-assessment. The agency added that banks should be working toward resolving replacement rate issues while communicating with affected customers and third parties.
SBA Report: $101 Billion in PPP Loans Approved in 2021
Since the start of the year to Feb. 7, the Small Business Administration has approved 1.3 million loans totaling $100.9 billion through its Paycheck Protection Program, according to new figures released Tuesday. A total of 4,161 banks were participating in the 2021 program at the time the report was issued, and banks accounted for 93% of PPP lending in 2021. Also through Feb. 7, in Indiana 20,417 loans were approved for a total of $1,760,767,612.
In 2021, 69.7% of all loans made so far were amounts under $50,000. Overall, the average loan size was $78,000. About half of the funds allocated to date have gone to four sectors: accommodation and food services; professional, scientific and technical services; the construction sector; and manufacturing. Since the start of the program, $623 billion has been approved for 6.43 million loans from 5,468 lenders, according to the SBA.
Fed Extends Rule Allowing Directors, Shareholders to Apply for PPP Loans
The Federal Reserve on Tuesday indicated it would extend a temporary exemption from Regulation O to allow bank directors and shareholders to receive Paycheck Protection Program loans from their related banks. Reg O generally limits lending activity to bank directors, shareholders, officers and businesses owned by these persons.
The exception – which applies only to PPP loans – will be extended through March 31. The Fed added that any PPP loans extended to bank directors and shareholders must conform to SBA’s guidance, which states that the eligible business must follow the same process as any similarly situated customer or account holder and must not receive favoritism from the bank.
SBA Updates Guidance on PPP Processing Fees
The Small Business Administration Monday night issued an updated procedural notice regarding the reporting process through while lenders report on Paycheck Protection Program loans and collect processing fees. The guidance addresses fees for new first-draw PPP loans and second-draw PPP loans and outlines reporting requirements for lenders.
For first-draw PPP loans made on or after Dec. 27, 2020, lenders will receive processing fees in the following amounts: 50% or $2,500, whichever is less, for loans of not more than $50,000; 5% for loans of more than $50,000 and not more than $350,000; 3% for loans of more than $350,000 and less than $2 million; and 1% for loans of at least $2 million.
For second-draw PPP loans, lenders will receive a 50% processing fee or $2,500, whichever is less, for loans of not more than $50,000; a 5% processing fee for loans of more than $50,000 and not more than $350,000; and a 3% processing fee for loans above $350,000.
Lenders should use SBA Form 1502 to report fully disbursed loans to SBA within 10 calendar days after the disbursement of a PPP loan.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.