COVID-19 UPDATES / FEDERAL GOVERNMENT RELATIONS
Latest SBA Guidance Clarifies PPP Funding Period, Use of Promissory Notes
Newly added FAQs from the Small Business Administration and the Department of the Treasury late Wednesday addressed two challenges with the Paycheck Protection Program that have been of significant concern to date: the promissory note to use with PPP loans; and the expectation for a five-day period between loan approval and funding.
Regarding the promissory notes, SBA clarified that lenders may use their own note or an SBA form. The agency released its own form this week, but it may be revised to meet lenders’ operational needs.
Another challenge reported by lenders has been the question of how soon PPP loan funds must be disbursed, particularly amid the choppy rollout of the PPP. According to the latest FAQs, the lender must make the first disbursement of the loan no later than 10 calendar days after the loan is approved.
Federal Reserve Provides Details on PPP Liquidity Facility
In an "Ask the Fed" webinar this morning, the Federal Reserve provided guidance on the Paycheck Protection Program Liquidity Facility. The PPPLF provides term funding to depository institutions that originate loans to small businesses. A slideshow of the webinar and a new FAQ was provided by the Federal Reserve to advise banks on the process.
Fed Unveils $2.3 Trillion More in Lending Capacity, Details ‘Main Street’ Program
The Federal Reserve is deploying its emergency lending powers to "an unprecedented extent," Federal Reserve Chairman Jerome Powell said in a speech in Washington yesterday morning. Powell’s remarks came shortly after the announcement a new round of lending facilities that would add $2.3 trillion in the Fed’s capacity to support the economy during the pandemic using its authority under Section 13(3) of the Federal Reserve Act.
Importantly, the Fed announced two new facilities - which were previewed in March - to support the Treasury's new Main Street Lending Program. Through these facilities, the Fed will purchase up to $600 billion in loans for companies with up to 10,000 employees or revenues of less than $2.5 billion. The Fed also provided details about its Paycheck Protection Program liquidity facility (see next story).
As part of the Main Street Lending Program, the Fed will purchase 95% participations in eligible loans of at least $1 million from U.S. depository institutions, bank holding companies and S&L holding companies. To be eligible, a loan must be originated starting April 8 and have a four-year term with interest deferred for a year; loan caps vary based on the facility purchasing the loan. Firms taking out PPP loans may also take out Main Street loans.
Read more about the Fed's actions
USDA Provides Direction on Paycheck Protection Program
The U.S. Department of Agriculture has issued guidance on the Paycheck Protection Program through the agency's COVID-19 Frequently Asked Questions page. The FAQ content includes answers to eligibility requirements for agriculture producers, farmers, and cooperatives, as well as other issues pertaining to ag workers and PPP documentation. To view the FAQ, scroll down to the Paycheck Protection Program topic.
Fed to Create Lending Facility for PPP; Agencies Provide Regulatory Capital Relief
The Federal Reserve announced it is creating a lending facility for banks providing loans under the Paycheck Protection Program. Through the Paycheck Protection Program Lending Facility, the Federal Reserve Banks will extend non-recourse loans to institutions eligible to make PPP loans. PPP loans guaranteed by the SBA that are originated by eligible banks may be pledged as collateral to the Federal Reserve Banks.
In addition, to help banks make use of the new facility, the federal banking agencies issued an interim final rule that will allow institutions to neutralize the regulatory capital effects - with respect to leverage and risk-based ratios - of loans pledged to the PPPL facility. The relief is consistent with the treatment the agencies are applying to banks using the Fed’s money market mutual fund liquidity facility.
The FDIC approved the interim final rule in a notational vote on Tuesday, and the other agencies are expected to follow suit shortly. The agencies will accept comments on the interim final rule for 30 days after publication in the Federal Register
IBA Urges OCC, FDIC to Further Refine Proposed CRA Overhaul
In a comment letter submitted Wednesday regarding the CRA modernization, the Indiana Bankers Association emphasized the need for a CRA regulatory framework that is durable and consistent, flexible and clear. The IBA noted the new rule should result in durable, streamlined regulation from all three Federal Banking Agencies, that accounts for the major changes the banking industry has undergone not only since the last update to the CRA, but also for those changes the banking industry will undergo for the foreseeable future.
The IBA also noted in the letter that while the Agencies’ efforts to modernize the CRA are greatly appreciated by our members, given the time between CRA updates and the scope of the Proposed Rule, any update to the CRA must be marked with clarity and transparency, providing our members with certainty regarding the applicability and meaning of the regulations implementing the CRA.
Finally, given the ever-changing nature of the banking industry, any Proposed Rule to the CRA must provide our members with flexibility to accomplish its community development goals. The rigidity of certain provisions of the Proposed Rule concern our members as they consider their ability to comply with new requirements imposed by the Proposed Rule.
SBA Unveils New Lender Gateway to Facilitate PPP Loans
In response to the significant operational challenges banks have experienced since Friday in accessing the SBA’s systems to make PPP loans, SBA Tuesday launched a new Lender Gateway in partnership with Amazon Web Services to facilitate connection to the E-Tran system.
The gateway can be accessed at connect.sba.gov. Lenders should create an account on SBA Connect, request authorization to the Paycheck Protection Lender Gateway by providing their Federal Reserve System or FDIC number as well as their authorization number. From there, they can proceed to the Lender Gateway to begin submitting loan authorization requests. The SBA has also established a lender hotline for those having issues accessing the E-Tran system. Lenders experiencing technical difficulties should contact the hotline at 888-572-0502.
Note: Due to system overload, the gateway link and hotline phone number may be temporarily unavailable.
Van Til Speaks on Paycheck Protection Program to Media
Yesterday IBA President and CEO Amber R. Van Til was featured in an interview regarding the Paycheck Protection Program on CBS 4 and FOX 59 in Indianapolis. Van Til spoke on the issues banks have faced throughout the rollout of the program and the possibility of additional funding for the PPP. The IBA has actively been discussing PPP issues that banks have faced with regulators, legislators and media. U.S. Sen. Todd Young was also featured in the interview.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.