FEDERAL GOVERNMENT RELATIONS
FDIC Chief Urges CECL Delay
FDIC Chairman Jelena McWilliams urged the Financial Accounting Standards Board to postpone implementation of the Current Expected Credit Losses accounting standards due to the coronavirus outbreak. McWilliams said the CECL accounting changes could strain the ability of some banks to serve their communities in a time of need.
Among other recommendations, McWilliams also called on FASB not to classify coronavirus-related loan modifications as troubled debt restructurings. She noted that the FDIC has encouraged banks to work with borrowers affected by COVID-19, including through loan modifications.
Fed Drops Rates to Zero, Announces Further Actions to Support Economy
Underscoring the serious threat that the coronavirus pandemic poses to the global economy, the Federal Reserve on Sunday took emergency action to support the economy and the credit needs of households and businesses.
The Federal Open Market Committee voted to reduce the federal funds rate by 100 basis points to a range of zero to 25 basis points. “Available economic data show that the U.S. economy came into this challenging period on a strong footing,” the FOMC said, but "[t]he effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook."
The FOMC said that it expects to maintain its near-zero range until "it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals." The FOMC also said it would resume asset purchases, increasing its Treasure holdings by at least $500 billion and of agency mortgage-backed securities by at least $200 billion in coming months.
Agencies: Banks Can Use Capital, Liquidity Buffers to Meet Coronavirus Challenges
The Federal Reserve, FDIC and OCC issued a statement calling on banks to use their capital and liquidity buffers to help meet the needs of households and businesses as the coronavirus pandemic continues. The agencies noted that banks have "built up substantial levels of capital and liquidity in excess of regulatory buffers and minimums" in the years since the financial crisis.
"The agencies support banking organizations that choose to use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and sound manner," the statement said. "The agencies expect banking organizations to continue to manage their capital actions and liquidity risk prudently."
The agencies also issued an interim final rule to facilitate the use of capital buffers to bolster lending. The rule, which takes effect upon publication in the Federal Register, revises the definition of eligible retained income for all depository institutions, bank holding companies and savings and loan holding companies subject to the agencies’ capital rule. The revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual.
Fed Details Actions to Support Business, Household Credit Needs
Meanwhile, to help address credit challenges in light of the pandemic, the Fed lowered the primary credit rate paid by institutions using the discount window, encouraged banks to use intraday credit from the reserve banks and cut reserve requirement ratios to zero, effective March 26.
Noting that U.S. banking firms "have built up substantial levels of capital and liquidity in excess of regulatory minimums and buffers," the Fed also encouraged banks to use their capital and liquidity buffers to lend to coronavirus-affected borrowers. "The Federal Reserve supports firms that choose to use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and sound manner," the Fed said. The Fed and five other central banks also said they would ease strains in global funding markets through standing U.S. dollar liquidity swap line arrangements.
FinCEN Issues Statement on BSA Reporting, Illicit Activity in Wake of Coronavirus
The Financial Crimes Enforcement Network has reminded banks to communicate promptly with FinCEN and their primary regulator if they experience delays in filing Bank Secrecy Act reports due to the coronavirus pandemic.
FinCEN also urged banks to be on alert for potential scams or fraudulent transactions connected to COVID-19. The agency said it has identified several emerging trends related to imposter scams, investment scams, product scams and insider training as concerns about the coronavirus have intensified.
FDIC Proposes ILC Rule, Considers Two Applications
The FDIC proposed new rules to codify the agency's capital, liquidity and source-of-strength requirements for industrial loan company parent companies. The agency's board of directors also said it would decide on two ILC deposit insurance applications, though it hadn't released its decision yet.
FDIC Chairman Jelena McWilliams said Congress expressly authorized deposit insurance for ILCs and, thus, the agency is obligated to consider their applications as it would any other. She said questions about mixing banking and commerce are best addressed by Congress.
House Financial Services Committee Chairman Maxine Waters (D-Calif.) separately urged the FDIC to hold off until it has received and considered feedback on the forthcoming proposal.
Foreclosures, Evictions Suspended for Fannie, Freddie, FHA
Fannie Mae, Freddie Mac and the Federal Housing Administration have suspended foreclosures and evictions for at least 60 days due to the coronavirus emergency.
The suspensions apply to homeowners with single-family mortgages backed by the government-sponsored enterprises or insured by the FHA.
The FHFA previously said the GSEs would provide forbearance allowing borrowers affected by the coronavirus to suspend a mortgage payment for up to 12 months.
CRA Consideration for Coronavirus Response
Federal banking regulators continued their response to the coronavirus outbreak, clarifying that they will provide favorable Community Reinvestment Act consideration of certain activities related to the national emergency.
The agency announcement follows several recent steps to improve flexibility during the outbreak. The FDIC has said it will work to reduce exam burdens and will conduct supervisory activities off-site for at least two weeks. Regulators have also encouraged banks to use their capital and liquidity buffers as they respond to the outbreak.