Fed extends PPP exception under Reg O

The Federal Reserve Board has announced the second extension of a rule to bolster the effectiveness of the SBA's Paycheck Protection Program. Like the earlier extensions, this one will temporarily modify the Board's rules so that certain bank directors and shareholders can apply to their banks for PPP loans for their small businesses. To prevent favoritism, the Board's Regulation O limits the types and quantity of loans that bank directors, shareholders, officers, and businesses owned by these persons can receive from their affiliated banks. However, these limits have prevented some small business owners from accessing PPP loans—especially in rural areas. The SBA clarified last year that PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, subject to certain limits, and without favoritism. The Board's rule extension will allow those individuals to apply for PPP loans, consistent with SBA's rules and restrictions.

The interim final rule making the extension only applies to PPP loans made during the period beginning February 15, 2020, and ending on March 31, 2021. Comments on the rule will be accepted for 45 days following its publication in the Federal Register.

• Publication and comment period update: Published at 86 FR 9837 on 2/17/2021, with a comment period ending on 4/5/2021,