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Advice for Businesses in Dealing with the Expanding Coronavirus Events

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Daily Financial Regulation Update - Thursday, June 25, 2020

By
FedACTion Task Force
On Jun 25, 2020

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Major Developments

SBA and Treasury Issue Additional Interim Final Rule on Additional Eligibility Revisions to the First Interim Final Rule on Eligibility Requirements for the Paycheck Protection Program and Update PPP Application Forms

June 24, 2020

The Small Business Administration and U.S. Department of the Treasury issued a new Interim Final Rule (IFR) revising an interim final rule initially posted on the SBA’s website on June 12, 2020 (and published in the Federal Register on June 18, 2020), which revised an interim final rule initially published in the Federal Register on April 15, 2020, by changing the eligibility requirement related to felony convictions of applicants or owners of the applicant.

The IFR further changes such eligibility requirements to clarify that an applicant is ineligible for a Paycheck Protection Program loan if an owner of 20% or more of the equity of the applicant is presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year.

Congress

Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), Enacted March 27, 2020.

Click here to view the full text of the Paycheck Protection Program Increase Act of 2020, Enacted April 24, 2020.

Click here to view the full text of the Paycheck Protection Program Flexibility Act of 2020, Enacted June 5, 2020.

Click here to view a running list of proposed legislation from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.

U.S. Senate

Committee on Banking, Housing, and Urban Affairs

Senators Warren and Brown Urge Regulators to Reverse Recent Rule that Reduced Capital Requirements

June 24, 2020

Senator Elizabeth Warren (D-MA), Ranking Member of the Senate Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection, and Senator Sherrod Brown (D-OH), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, raised concerns to the Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) regarding recent changes the regulators implemented that reduced regulatory capital requirements for the nation’s largest banks. The requirement, known as the Supplementary Leverage Ratio (SLR), is a key component of the regulatory framework that was developed following the 2008 financial crisis. The SLR applies to the largest financial institutions and requires them to have capital equal to 3% of the bank’s total on-balance sheet assets and off-balance sheet exposures. On May 15, 2020, the FRB FDIC and OCC released an Interim Final Rule that would temporarily allow banks to exclude certain assets from the SLR denominator until March 2021.

Senators Urge Fed to Suspend Payments to Shareholders during Pandemic

June 24, 2020

Senator Brian Schatz (D-HI) led a group of senators in calling on the Board of Governors of the Federal Reserve System (FRB) to require banks and bank holding companies to suspend dividend payments to shareholders as the economy recovers from the ongoing COVID-19 crisis. The senators urged FRB Chair Jerome Powell and Vice Chair Randal Quarles to ensure banks and bank holding companies conserve capital now so that they can continue lending if the economic fallout from the pandemic turns more severe.

Federal Agencies

Conference of State Bank Supervisors

CFSB Blog: Why OCC Preemption Bulletins Do Not Impact State Covid-19 Relief Measures

June 24, 2020

Mike Townsley, Conference of State Bank Supervisors (CSBS) Director of Regulatory Policy and Policy Counsel, released a blog on “Why OCC Preemption Bulletins Do Not Impact State COVID-19 Relief Measures.” He notes that the Office of the Comptroller of the Currency (OCC) recently issued several bulletins asserting that the National Bank Act (NBA) would preempt certain types of state and local COVID-19 relief measures. The OCC’s bulletins encourage state and local officials to expressly exempt national banks and other federally chartered institutions from these state COVID-19 relief measures. He also notes that the bulletins and the assertions of preemption therein do not have the force and effect of law, because the OCC did not follow the process required by the NBA to determine that state COVID-19 relief measures are preempted or establish that the substantive preemption standard set forth in the NBA has been met.

Securities and Exchange Commission

FASB’s Q&A Document on Applying the U.S. GAAP Financial Reporting Taxonomy to COVID-19 Pandemic and Relief Disclosures

June 24, 2020

In response to frequently asked questions, the Financial Accounting Standards Board Taxonomy staff published a question and answer document on how to apply the U.S. GAAP Financial Reporting Taxonomy for disclosures relating to the effects of the COVID-19 pandemic and relief activities.

Department of Housing and Urban Development/Federal Housing Administration

HUD Awards Nearly $1 Million in CARES Act Funding to Nineteen State and Local Fair Housing Organizations to Support COVID-19 Related Activities

June 24, 2020

The Department of Housing and Urban Development (HUD) announced that it is awarding $962,160 in funding to nineteen HUD Fair Housing Assistance Program (FHAP) agencies in New York, Louisiana, Rhode Island, Iowa, Pennsylvania, Massachusetts, California, Texas, Indiana, Florida, Nebraska, Hawaii, South Carolina, Maryland, Michigan, Connecticut and New Jersey to support activities related to COVID-19. The awards to the nineteen organizations are part of $1.5 million in Partnership and Special Enforcement Effort funds being provided to FHAP agencies through the CARES Act.

Freddie Mac

Revised Liquidity Requirement for Mortgages in COVID-19-Related Forbearance

June 24, 2020

Freddie Mac, under the guidance of the Federal Housing Finance Authority and in alignment with Fannie Mae, is updating the liquidity requirements for seller/servicers that are not depository institutions in recognition of the reduced servicing costs associated with mortgages in COVID-19-related forbearance relative to servicing costs of other non-performing loans. In lieu of the liquidity requirement in Guide Section 2101.2(c), seller/servicers that are not depository institutions must at all times maintain liquidity according to the revised requirements set forth in the Bulletin.

Temporary Servicing Guidance Related to COVID-19 and EDR Clarifications for All Hardship Reasons

June 24, 2020

Freddie Mac has issued temporary servicing guidance related to COVID-19 and Electronic Default Reporting (EDR) clarifications for all hardship reasons. It announced an extension to the COVID-19 foreclosure moratorium; servicers must suspend all foreclosure actions, including foreclosures sales, through August 31, 2020. Freddie Mac also provided guidance regarding EDR requirements that apply to all eligible hardship reasons, including COVID-19 related hardships for: (i) EDR reporting for a mortgage that is current (effective October 1, 2020) and (ii) required EDR reporting when sending a streamlined offer for a Freddie Mac Flex Modification®.

International

European Commission

EU Budget 2021: An Annual Budget Focused on European Recovery

June 24, 2020

The European Commission proposed an EU budget of €166.7 billion for 2021, to be complemented by €211 billion in grants and approximately €133 billion in loans under Next Generation EU, the temporary recovery instrument aimed at mobilizing investments and kick-starting the European economy.

Bank of England Prudential Regulation Authority

Statement by the PRA on Implementation of the EBA Guidelines to Address Gaps in Reporting Data and Public Information in the Context of COVID-19

June 24, 2020

The Prudential Regulation Authority (PRA) issued a statement to provide guidance to PRA-regulated firms on the implementation of the European Banking Authority’s “Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis” (Guidelines), which were issued on June 2, 2020.