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04/10/2020

CFPB blog article on student loans and coronavirus

The CFPB has posted an updated article on its Blog reviewing key things student borrowers need to know about their loans and the effect of the CARES Act.

04/10/2020

Capital rules relaxed for PPP loans

The federal bank regulatory agencies announced Thursday an interim final rule to encourage lending to small businesses through the Small Business Administration's Paycheck Protection Program, or PPP. The PPP was established by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, and provides loans to small businesses so that they can keep their workers on the payroll during the disruptions caused by the coronavirus. 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. Comments will be accepted for 30 days following Federal Register publication.

04/10/2020

Treasury support for new lending programs

Treasury announced yesterday that Secretary Mnuchin had approved the Treasury Department's support of new and expanded lending programs concurrently announced by the Federal Reserve Board.

04/10/2020

Fed to provide up to $2.3 Trillion in added economic relief

The Federal Reserve announced on Thursday it will provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic. The actions the Federal Reserve is taking today to support employers of all sizes and communities across the country will:

  • Bolster the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. The PPP provides loans to small businesses so that they can keep their workers on the payroll. The Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value;
  • Ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. The Department of the Treasury, using funding from the CARES Act, will provide $75 billion in equity to the facility;
  • Increase the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). These three programs will now support up to $850 billion in credit backed by $85 billion in credit protection provided by the Treasury; and
  • Help state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities. The Treasury will provide $35 billion of credit protection to the Federal Reserve for the Municipal Liquidity Facility using funds appropriated by the CARES Act.

Related resources:

04/09/2020

PPP FAQ updated again

The Treasury/SBA FAQ document for PPP loans was updated yesterday. Two changes addressed lender concerns in additions to the FAQ:

  • Question 19: SBA clarified that lenders may use their own note or an SBA form. The agency has released its own form, but it may be revised to address industry feedback to meet lenders’ operational needs.
  • Question 20: The lender must make the first disbursement of the loan no later than 10 calendar days after the loan is approved.

04/09/2020

Fed makes temporary change to Wells Fargo restrictions

The Federal Reserve Board announced Wednesday that it will temporarily and narrowly modify the growth restriction on Wells Fargo & Company so that it can provide additional support to small businesses. The change will only allow the firm to make additional small business loans as part of the Paycheck Protection Program, or PPP, and the Federal Reserve's forthcoming Main Street Lending Program.

The Board will require benefits from the PPP and the Main Street Lending Program to be transferred to the U.S. Treasury or to non-profit organizations approved by the Federal Reserve that support small businesses. The change will be in place as long as those facilities are active.

The Board's growth restriction was implemented in February 2018 because of widespread compliance and operational breakdowns at Wells Fargo that resulted in harm to consumers and because the company's activities were ineffectively overseen by its board of directors. The growth restriction provides an overall cap on the size of the firm's balance sheet. The change announced Wednesday provides additional support to small businesses hurt by the economic effects of the coronavirus by allowing activities from the PPP and the Main Street Lending Program to not count against the cap.

04/08/2020

G.19 consumer credit

The Federal Reserve has posted February 2020 G.19 Consumer Credit data. In February, consumer credit increased at a seasonally adjusted annual rate of 6-1/2 percent. Revolving credit increased at a 4-1/2 percent annual rate, while nonrevolving credit increased at a 7 percent annual rate.

04/08/2020

OCC supports FinCEN’s responses to COVID-19

Bulletin 2020-34 has been issued by the OCC in support of FinCEN’s regulatory relief and risk-based approach for financial institution compliance to COVID-19. The FinCEN BSA Notice provides for certain regulatory relief under the risk-based approach to BSA compliance, including exempting from beneficial ownership requirements new loans extended to existing customers under the CARES Act Paycheck Protection Program (under certain conditions). The OCC supports this approach and encourages all banks to follow a risk-based approach to managing their BSA compliance programs. When evaluating a bank’s BSA compliance program, the OCC will consider the actions taken by banks to protect and assist employees, customers, and others in response to the COVID-19 pandemic, including any reasonable delays in BSA report filings, beneficial ownership verification or re-verification requirements, and other risk management processes. Banks are encouraged to contact their examiners if they anticipate delays.

04/08/2020

Revised interagency statement on COVID-19-related loan modifications

The federal financial institution regulatory agencies (the agencies), in consultation with state financial regulators, have issued a revised interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and providing additional information regarding loan modifications. The revised statement also provides the agencies' views on consumer protection considerations.

The revised statement—

  • Clarifies the interaction between the interagency statement issued on March 22, 2020, and the temporary relief provided by Section 4013 of the CARES Act signed into law on March 27, 2020. Section 4013 allows financial institutions to suspend the requirements to classify certain loan modifications as troubled debt restructurings (TDRs).
  • Provides supervisory interpretations on past due and nonaccrual regulatory reporting of loan modification programs and regulatory capital.

The agencies encourage financial institutions to work with borrowers and will not criticize institutions for doing so in a safe-and-sound manner. The agencies view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk.

The agencies' examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs. Regardless of whether modifications are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.

The FDIC issued FIL-36-2020 repeating the information in the joint press release, and noting that it has moved its FIL-22-2020, dated March 22, 2020, to inactive status.

04/08/2020

Treasury has updated its PPP FAQs

The Treasury Department has updated its FAQ document on Paycheck Protection Program Loans. Participating banks should "bookmark" that page and check it regularly for updates.

The changes to the FAQs as of April 6 provide these clarifications:

  1. That lenders may rely on borrower certifications as to the applicability of affiliation rules (question 4).
  2. That lenders do not need to re-verify beneficial ownership information for existing customers. (If participating depository institutions have not yet collected beneficial ownership information on an existing customer, they are not required to do so when that customer applies for PPP loans, unless the lender's risk-based BSA compliance program indicates otherwise.) (question 18)
  3. How payroll is defined under the CARES Act, including the calculation of non-cash benefits and coverage of paid leave. (Various questions)
  4. Methods for determining payroll to calculate maximum loan amounts. (various questions)
  5. That lenders who processed applications based on the April 2 interim final rule may rely on the laws, rules and guidance available at the time. (question 17)

Also, the SBA has approved and made available a promissory note that can be used for PPP loans. The agency has also established a new lender gateway at connect.sba.gov to be used for submitting loan authorization requests. For updated lender information on the SBA's Paycheck Protection Program, access the Lender Forms and Guidance section of its Paycheck Protection Program webpage.

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