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Daily Financial Regulation Update - Friday, April 24, 2020

April 24, 2020

By FedACTion Task Force

PH Client Alerts

to read more from our Coronavirus series.

Major Developments

April 23, 2020

House of Representatives Approves H.R. 266 the Paycheck Protection Program and Health Care Enhancement Act.

Treasury Updates Paycheck Protection Program FAQ To Address PPP Loans to Public Companies

April 23, 2020

The U.S. Department of the Treasury (Treasury) updated its Frequently Asked Questions (FAQs) on the Paycheck Protection Program (PPP) to provide guidance on whether businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan (FAQ 31). Treasury advises that borrowers must carefully assess their economic need for a PPP loan and make a good faith certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Treasury noted that a public company with substantial market value and access to capital markets unlikely will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to the Small Business Administration, upon request, the basis for its certification. Moreover, Treasury provided a May 7, 2020 deadline for large companies to repay PPP loans and be deemed to have obtained them in good faith.

Federal Reserve to Open PPP Liquidity Facility to Additional SBA-qualified Lenders

April 23, 2020

The Federal Reserve announced its intention to expand the Paycheck Protection Program (PPP) Liquidity Facility to additional SBA-qualified lenders rather than limiting the facility to just depository institutions. The facility extends credit to PPP lenders, by taking PPP loans as collateral at face value.

Federal Reserve Board Outlines Intent to Ensure Transparency of its CARES Act Liquidity and Lending Facilities

April 23, 2020

The Federal Reserve Board outlined the information it will make publicly available regarding its Section 13(3) emergency liquidity and lending facilities. Specifically, the Federal Reserve Board will report information, without redactions, on a monthly basis for the liquidity and lending facilities using CARES Act funding, including:

(i) the names and details of participants in each facility,

(ii) amounts borrowed and interest rate charged, and

(iii) overall costs, revenues, and fees for each facility.

Congress

to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, Enacted March 27, 2020.

to view the full text of the Paycheck Protection Program and Health Care Enhancement Act, adopted by the U.S. Senate April 21, 2020 and adopted by the U.S. House of Representatives on April 23, 2020.

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 Small Business and Entrepreneurship

Rubio Sends Letters to Large Banks Participating in the Paycheck Protection Program Requesting Information on Application Process

April 23, 2020

U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship (Committee), sent a letter to a number of large banking institutions who participate in the Paycheck Protection Program (PPP) requesting information on their application process amid recent reports certain large banks prioritized the applications of certain applicants over others. The letters were sent to the Chief Executive Officers of Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, PNC Financial Services Group, Inc., KeyBank, NA, M&T Bank, Huntington Bancshares, Inc., TD Bank, Trust Bank, Zions Bank, Regions Bank, and US Bancorp.

Cardin, Rubio and Velázquez Seek Information on SBA Data Breach

April 23, 2020

U.S. Senators Marco Rubio (R-FL) and Ben Cardin (D-MD), Chairman and Ranking Member of the Senate Committee on Small Business and Entrepreneurship, and House Committee on Small Business Chairwoman Nydia Velázquez (D-NY) sent a letter to the Small Business Administration (SBA) Administrator Jovita Carranza, seeking information on a recent SBA data breach that exposed the personally identifiable information (including Social Security Number, income, name and contact information) of nearly 8,000 individuals who applied for an Economic Injury Disaster Loan.

Federal Agencies

Federal Reserve Board

Federal Reserve Board increases the availability of intraday credit extended by Federal Reserve Banks

April 23, 2020

The Federal Reserve Board (Board) announced temporary actions aimed at increasing the availability of intraday credit extended by Federal Reserve Banks on both a collateralized and uncollateralized basis to mitigate the disruptions from COVID-19. In particular, the actions are consistent with and reinforce the Board's efforts to encourage regular use of intraday credit by healthy financial institutions.

Securities and Exchange Commission

Division of Corporation Finance Statement Regarding Requirements for Certain Paper Documents (other than Forms 144) in Light of COVID-19 Concerns

April 23, 2020

The staff of the Division of Corporation Finance issued a statement about the logistical difficulties of mailing or delivering paper copies of certain forms to the Securities Exchange Commission (SEC) in light of COVID-19. According to the staff’s statement, it will not recommend enforcement action to the SEC if certain forms are submitted via email in lieu of mailing or delivering the paper document to the SEC or, if a filer is unable to provide a manual signature, to provide a typed form of signature. The statement is temporary and covers filers who submit the following forms for the period from and including April 23, 2020 to June 30, 2020: (i) annual reports to security holders furnished by foreign private issuers on Form 6-K pursuant to Rule 101(b)(1) of Regulation S-T; (ii) Forms 11-K pursuant to Rule 101(b)(3) of Regulation S-T; (iii) periodic reports and distribution reports filed by certain international development banks pursuant to Rule 101(b)(5) of Regulation S-T; (iv) reports or other documents furnished by foreign private issuers on Form 6-K pursuant to Rule 101(b)(6) of Regulation S-T; and (v) unabridged foreign language documents and English translations of a foreign government’s or its political subdivision’s latest annual budget pursuant to Rules 306(b) and (c) of Regulation S-T.

Commodity Futures Trading Commission

CFTC Provides Further Relief to Market Participants in Response to COVID-19

April 23, 2020

The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) announced that it has issued additional targeted no-action relief to futures commission merchants (FCMs) and introducing brokers (IBs) in response to the COVID-19 pandemic. Subject to conditions stated in the letter, the DSIO granted targeted no-action relief to permit eligible FCMs and IBs taking advantage of covered loans under the Paycheck Protection Program to add back to capital certain amounts under covered loans that are forgivable in accordance with Regulation 1.17. In order to further align the targeted relief provided in the letter with that issued by FINRA, DSIO also granted targeted no-action relief to IBs and FCMs who are permitted by FINRA to add-back for capital purposes accrued FINRA annual assessment fees.

Statements from the April 22 Meeting of the Agricultural Advisory Committee on the COVID-19 Pandemic and Agricultural Commodity Markets

April 22, 2020

Commodity Futures Trading Commission Chairman Heath P. Tarbert, Commissioner Brian Quintenz, and Commissioner Dan M. Berkovitz spoke at the meeting of the Agricultural Advisory Committee on the COVID-19 pandemic and its impact on agricultural commodity markets.

Federal Housing Finance Agency

FHFA Supports Small Business by Allowing Federal Home Loan Banks to Accept Paycheck Protection Program Loans as Collateral

April 23, 2020

The Federal Housing Finance Agency announced that Federal Home Loan Banks can accept Paycheck Protection Program (PPP) loans as collateral when making loans to member banks. Federal Home Loan Banks can accept PPP loans, provided those Federal Home Loan Banks comply with certain safety and soundness requirements.

Fannie Mae

Multifamily Investor Update Regarding COVID-19 Forbearances

April 23, 2020

As part of Fannie Mae’s efforts to provide information to its investor community, it has published a list that identifies mortgage-backed securities (MBS) for which an underlying loan is in a COVID-19-related forbearance period. The “Multifamily MBS COVID-19 Forbearance List”, which includes the pool number, CUSIP, and loan number, will be updated weekly. According to the statement, the list includes only loans in a forbearance period related to COVID-19 and excludes loans in a forbearance period for other reasons. In addition, the list does not include any REMIC securities or Megas®. Investors are responsible for determining if an MBS held in their portfolio has a loan in a forbearance period for reasons not related to COVID-19 and whether any REMIC securities or Megas® held in their portfolio include MBS for which an underlying loan is in a forbearance period.

Fannie Mae Issues Lender Letter to Fannie Mae Single-Family Sellers on Selling Loans in Forbearance Due to COVID-19

April 22, 2020

As a result of the increase in loans going into forbearance after loan closing but before sale to Fannie Mae, the agency is putting in place additional due diligence to ensure borrowers have stable income with which to repay their loans. The letter addresses the eligibility and delivery requirements for these loans.

Department of Labor

Unemployment Insurance Weekly Claims During COVID-19

April 23, 2020

In the week ending on April 18, the advance figure for seasonally adjusted initial claims was 4,427,000, a decrease of 810,000 from the previous week’s revised level. The previous week's level was revised down by 8,000, from 5,245,000 to 5,237,000. The four-week moving average was 5,786,500, an increase of 280,000 from the previous week's revised average. The previous week’s average was revised down by 2,000, from 5,508,500 to 5,506,500.

Department of Education

Secretary DeVos Makes Available Over $13 Billion in Emergency Coronavirus Relief to Support Continued Education for K-12 Students

April 23, 2020

U.S. Secretary of Education Betsy DeVos announced that more than $13.2 billion in emergency relief funds are now available to state and local education agencies to support continued learning for K-12 students whose educations have been disrupted by the coronavirus. Education leaders will have the flexibility to use funds from the Elementary and Secondary School Education Relief Fund for immediate needs, such as tools and resources for distance education, ensuring student health and safety, and developing and implementing plans for the next school year.

Financial Accounting Standard Board

FASB Seeks Public Comment on Proposal to Offer Limited Effective Date Delays on Time-Sensitive Standards in Response to the COVID-19 Pandemic

April 21, 2020

The Financial Accounting Standards Board issued a proposed Accounting Standards Update (ASU) that would grant a one-year effective date delay for certain stakeholders applying leases and revenue recognition guidance. Comments on the proposed ASU are due by May 6, 2020.

International

Bank of England

Monetary policy and the Bank of England’s balance sheet - Speech by Gertjan Vlieghe

April 23, 2020

Gertjan Vlieghe, external member of the Bank of England Monetary Policy Committee, explains how the Bank of England uses its balance sheet as a monetary policy tool to hit the 2% inflation target and support the UK economy.

Bank of England Prudential Regulatory Authority

Follow-up note to insurers on the letter from Sam Woods ‘Covid-19: IFRS 9, capital requirements and loan covenants’

April 23, 2020

On March 26, 2020, Sam Woods wrote to Chief Executive Officers of UK Banks setting out the Prudential Regulatory Authority’s (PRA) position regarding IFRS 9, capital requirements for their firms and loan covenants. Some insurance firms have sought clarification as to how the points in that letter should be read across to their internal assessments of loan creditworthiness and treatment of unrated assets. The PRA’s expectations for the use by insurers of unrated assets are set out in Supervisory Statement (SS) 3/17 ‘Solvency II: Illiquid, unrated assets’ (updated on April 2, 2020). Paragraphs 2.8A to 2.8L of the SS set out relevant expectations regarding risk identification and the application of judgements and methodologies. The accompanying Policy Statement (PS) 9/20 ‘Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets’ further refers to published measures to alleviate operational burdens arising due to the COVID-19 outbreak.

UK Financial Conduct Authority

Changes to regulatory reporting up to June 30, 2020 Due to Impact of COVID-19

April 22, 2020

The Financial Conduct Authority (FCA) has introduced some temporary measures for firms submitting regulatory returns. The FCA has extended the submission deadlines for certain specified regulatory returns. The extension applies for submissions that are due up to and including June 30, 2020. For example, if a return is due on May 22, 2020, but a two-month extension has been granted, the submission will need to be completed by July 22, 2020. If the extended deadline date happens to fall on a weekend, the submission should be made by the next working business day. For small or medium-size businesses (paying less than £10,000 in fees and levies in 2020/2021) the administrative fee for late returns has been waived until June 30, 2020.