Federal Reserve

Federal Bank Regulatory Agencies Modify Liquidity Coverage Ratio for Banks Participating in Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility

 

On May 5, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve, and the Office of the Comptroller of the Currency (“OCC”) announced an interim final rule to facilitate the flow of credit to households and businesses from banking organizations participating in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility. The rule neutralizes the impact of the Liquidity Coverage Ratio rule associated with the funding provided by these facilities. Release. Rule.

Federal Reserve Board Announces Expansion of Municipal Liquidity Facility

 

On April 27, the Federal Reserve released an updated Term Sheet and FAQs expanding the scope and duration of its Municipal Liquidity Facility. Among other changes, the updated Term Sheet provides that eligible notes must have less than 36 months maturity (previously 24 months) and eligible issuers include counties with at least 500,000 residents and cities with at least 250,000 residents (previously 2 million and 1 million). The Federal Reserve also extended the program’s termination date by three months to December 31. Release. Updated Term Sheet. FAQs.

Federal Reserve Announces its Paycheck Protection Program Liquidity Facility is Fully Operational and Available to Provide Liquidity to Eligible Financial Institutions

 

On April 16, the Federal Reserve announced that its Paycheck Protection Program Liquidity Facility is fully operational and available to provide liquidity to eligible financial institutions, which will help support small businesses. The Small Business Administration’s Paycheck Protection Program, or PPP, guarantees loans extended by qualified lenders to small businesses so that those businesses can keep workers employed. Release.

Federal Bank Regulators Issue Interim Final Rule for Paycheck Protection Program Facility

 

On April 9, the federal bank regulatory agencies today announced an interim final rule to encourage lending to small businesses through the Small Business Administration’s Paycheck Protection Program (PPP). The interim final rule modifies the agencies’ capital rules to neutralize the regulatory capital effects of participating in the Federal Reserve’s PPP facility because there is no credit or market risk in association with PPP loans pledged to the facility. Consistent with the agencies’ current capital rules and the CARES Act requirements, the interim final rule also clarifies that a zero percent risk weight applies to loans covered by the PPP for capital purposes. The rule is effective immediately. Release.

Federal Agencies Make Joint Release Announcing Actions to Support Lending to Households and Businesses

 

On March 27, the Federal Reserve Board, the FDIC and the OCC announced two actions to support continued lending by banking organizations to households and businesses. The first action is early adoption of the standardized approach for measuring counterparty credit risks finalized in November 2019, with a new effective date of April 1, 2020. The second action is an interim final rule that allows banking organizations that would otherwise be required to adopt the new current expected credit loss accounting standard this year, to have the option of delaying adopting the new standard for up to two years. Federal Reserve Release. FDIC Release. OCC Release.

Federal Reserve Announces New Efforts to Stabilize U.S. Economy

 

On March 23, the Federal Reserve announced several new measures it will take in an effort to support and stimulate the economy during the COVID-19 pandemic. The Federal Open Market Committee will purchase Treasury securities and agency mortgage-backed securities (including commercial mortgage-backed securities). Several new credit facilities will be established to support the flow of credit – the Primary Market Corporate Credit Facility (PMCCF), the Secondary Corporate Credit Facility (SMCCF) and the Term Asset-Backed Securities Loan Facility (TALF). Certain existing credit facilities will be expanded to include additional securities – the Money Market Mutual Fund Liquidity Facility (MMLF) and the Commercial Paper Funding Facility (CPFF). The Federal Reserve also announced plans to create a Main Street Business Lending Program to facilitate lending to small businesses. Release.

Federal Reserve and FDIC Release Public Sections of Resolution Plans for Largest U.S. Banks

 

On July 23, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) released the public sections of the resolution plans submitted by the eight U.S. global systemically important banks. The full resolution plans, which are required by the Dodd-Frank Act and commonly known as living wills, were submitted for the agencies’ review on July 1. Release.

Agencies Approve Amendments to Swap Margin Rule

 

On September 21, the Farm Credit Administration, the FDIC, the Federal Housing Finance Agency, the Federal Reserve and the OCC approved final amendments to swap margin requirements to conform with recent rule changes that impose new restrictions on certain qualified financial contracts of systemically important banking organizations. These amendments established minimum margin requirements for swaps and security-based swaps that are not cleared through a clearinghouse. The margin requirements are designed to help ensure the safety and soundness of swap entities and reduce risks to the stability of the financial system associated with non-cleared swaps activity. Rule.

Federal Reserve Seeks Comments on LIBOR Alternatives

 

On August 24, 2017, the U.S. Federal Reserve requested public comments on a plan for the New York Federal Reserve and the Office of Financial Research to come up with three reference rates based on U.S. Treasuries-backed repurchase agreements (repos). The proposed rates are to be called:

  • Tri-party General Collateral Rate (TGCR)
  • Broad General Collateral Rate (BGCR)
  • Secured Overnight Financing Rate (SOFR)

The most comprehensive of the rates, SOFR, would be a broad measure of overnight Treasury financing transactions and was selected by the Alternative Reference Rates Committee (ARRC) as a U.S. dollar LIBOR alternative. LIBOR is a benchmark for $350 trillion worth of financial products worldwide, including $150 trillion in derivatives.

Public comments on these proposed rates are requested within 60 days of publication in the Federal Register, which is expected shortly, according to a Federal Reserve Board press release. To read the press release, click here.

Federal Banking Agencies Propose Extension of Certain Capital Rule Transitions

 

On August 22, 2017, in preparation for a forthcoming proposal that would simplify regulatory capital requirements, federal banking regulators proposed a rule that would extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights. The extension would apply to banking organizations that are not subject to the agencies’ advanced approach to capital rules, which are generally those with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure. Comments on this proposal will be accepted for 30 days after publication in the Federal Register. FDIC Press Release. Federal Reserve Press Release. OCC Press Release. Proposal.