Industry Developments

Temporary Policy Allowing Purchase of Qualified Loans in Forbearance is Extended

 

On October 21, the Federal Housing Finance Agency (FHFA) extended a policy allowing certain single-family mortgages in forbearance to be delivered to Fannie Mae and Freddie Mac for borrowers who sought payment forbearance due to the impact of COVID-19 shortly after closing on their single-family loan. Normally, mortgage loans in either forbearance or delinquency are ineligible for delivery. The policy was extended for loans originated through November 30, 2020. Release.

Agencies Issue a Final Rule to Strengthen Resilience of Large Banks

 

On October 20, the federal bank regulatory agencies finalized the net stable funding ratio rule, which requires large banks to maintain a minimum level of stable funding relative to each institution’s assets, derivatives, and commitments over a one-year period. The rule aims to strengthen the resilience of large banks and their ability to lend across economic conditions. Release.

Agencies Finalize Rule to Reduce the Impact of Large Bank Failures

 

On October 20, the federal bank regulatory agencies finalized a rule to limit the impact of the failure of large banking organizations. The final rule requires a more stringent regulatory capital treatment for holdings of total loss-absorbing capacity (TLAC) debt, which is issued by U.S. global systemically important bank holding companies (GSIBs). This is intended to discourage large banking organizations from purchasing such debt and reduce the interconnectedness between large banking organizations. The final rule is effective on April 1, 2021. Release. 

SBA and Treasury Announce Simpler PPP Forgiveness for Loans of $50,000 or Less

 

On October 8, the Small Business Administration (SBA), in consultation with the Treasury Department, released an Interim Final Rule providing for a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. The new rule is intended to ease burdens on small borrowers and PPP lenders in submitting and processing loan forgiveness applications. Treasury Press Release. Interim Final Rule.

Federal Banking Agencies Exempt Premium Finance Lending from BSA/AML Customer Identification Program Requirements

 

On October 9, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA), with approval from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), issued a revised order exempting premium finance loans (loans made to facilitate a borrower’s purchase of property and casualty insurance policies) from the customer identification program requirements applicable to a lender’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. Order.

SEC Adopts Amendments to Modernize Shareholder Proposal Rule

 

On September 23, the Securities and Exchange Commission (SEC) adopted amendments to modernize the process for a shareholder to have its proposal included in a company’s proxy statement for consideration by all of the company’s shareholders. The amendments aim to ensure that shareholder-proponents demonstrate a sufficient economic stake or investment interest in a company before they are able to submit proposals to be included in a company proxy’s statement, paid for by all shareholders. Release.

Federal Reserve Board Releases Hypothetical Scenarios for Second Round of Bank Stress Tests

 

On September 17, the Federal Reserve Board released its hypothetical scenarios for a second round of bank stress tests. Earlier this year, the Board’s first round of stress tests found that large banks were well capitalized under a range of hypothetical events. An additional round of stress tests is being performed due to the continued uncertainty from the COVID event. Release.

Banking Regulatory Agencies Finalize Rules on Real Estate Appraisals and Regulatory Treatment of Emergency Capital Facilities

 

On September 29, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC), together with the OCC and the Federal Reserve (the “Agencies”), published final rules temporarily deferring real estate appraisal requirements for financial institutions and mitigating the regulatory capital and liquidity effects for banks that participate in certain COVID-related Federal Reserve liquidity facilities. The final rules are identical or substantially similar to interim final rules currently in effect that were issued earlier this year. The final rule on real estate appraisals temporarily allows financial institutions to defer completion of appraisals and evaluations on certain residential and commercial real estate transactions for up to 120 days after closing. The final rule on the Federal Reserve liquidity facilities provides that banking organizations that participate in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility are permitted to exclude exposures acquired through their participation in such programs when determining their compliance with the Agencies’ regulatory capital rule and/or liquidity coverage ratio rule. OCC ReleaseFederal Reserve ReleaseFDIC Release

Agencies Issue Corrections to Standardized Approach for Counterparty Credit Risk; Final Rule

 

On September 17, the OCC along with the Board of Governors of the Federal Reserve System and the FDIC published a final rule that makes technical corrections to certain provisions of the capital rule related to the standardized approach for counterparty credit risk (SA-CCR), which is used for calculating the exposure amount of derivative contracts. Final Rule.

CFTC Finalizes Rules to Improve Swap Data Reporting

 

On September 17, the Commodity Futures Trading Commission (CFTC) approved three final rules to revise CFTC regulations for swap data reporting, dissemination and public reporting requirements for market participants. The CFTC also approved a final rule that will permit derivatives clearing organizations organized outside of the U.S. to be registered with the CFTC. The CFTC also approved a supplemental notice of proposed rulemaking regarding amendments to the CFTC’s regulations that govern bankruptcy proceedings for commodity brokers. Release.