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Daily Financial Regulation Update - Thursday, April 23, 2020

April 23, 2020

By FedACTion Task Force

PH Client Alerts

to read more from our Coronavirus series.

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 Increase Act of 2020, adopted by the U.S. Senate April 21, 2020 and being considered by the 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.

Federal Agencies

Agencies Publish Final Rule on the Current Expected Credit Losses Methodology for Allowances

April 22, 2020

The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System published a final rule in the Federal Register that corrects errors in and clarifies the March 31, 2020 interim final rule (IFR), which provides a five-year transition period for the impact of the current expected credit loss methodology (CECL) on regulatory capital. The final rule:

(i) specifies that Category III banking organizations that elect to use the CECL transition in the IFR can adjust total leverage exposure when calculating the supplemental leverage ratio; and

(ii) clarifies that for purposes of calculating the modified CECL transitional amount and modified adjusted allowances for credit losses transitional amount under the IFR, the CECL transitional amount, deferred tax assets transitional amount, and adjusted allowances for credit losses transitional amount can be either a positive or negative number.

Federal Reserve Bank of Boston

Boston Fed Analysis Outlines Grim Economic Consequences of COVID-19 Pandemic in New England

April 22, 2020

The Federal Reserve Bank of Boston released a report by the New England Public Policy Center (NEPPC) that finds that massive job loss, widespread difficulty making rent or mortgage payments, and the prospect of steep declines in state tax revenues are among the key economic consequences New England is facing from the COVID-19 outbreak and the public-health efforts to stop the spread of the disease. Preliminary findings from forthcoming NEPPC studies of the fallout confirm that the impact has been severe for the region’s businesses, workers, and households. The findings also indicate that New England state governments will suffer major losses of tax revenues.

Conference of State Bank Supervisors

CSBS President and CEO John Ryan Issues Statement on FHFA Mortgage Servicer Plan

April 22, 2020

John Ryan, president and CEO of the Conference of State Bank Supervisors, issued a statement on the mortgage servicer plan announced by Federal Housing Finance Agency Director Mark Calabria, noting: “FHFA’s commitment to provide partial support to GSE mortgage servicers during this unimaginable national challenge is an important step, but only a first step. Additional efforts are needed to ensure servicers are able to provide the support to consumers promised by Congress…” Ryan called for the establishment of a new credit facility by the Federal Reserve and Treasury as a backstop to ensure that mortgage servicers have access to predictable and reliable funding to avoid breakdowns in the mortgage finance system.

Federal Deposit Insurance Corporation

Banker Webinar: How to Become a Paycheck Protection Program Lender

April 22, 2020

The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve, the Office of the Comptroller of the Currency, and the National Credit Union Administration will host a webinar for bankers on April 23, 2020 at 11:00 a.m, Eastern time. Bankers will have the opportunity to hear directly from officials within the Small Business Administration regarding the Paycheck Protection Program.

Securities and Exchange Commission

SEC Extends EDGAR Filing Window on April 29, 2020 for Registered Investment Companies and Business Development Companies

April 22, 2020

The Securities and Exchange Commission (SEC) Division of Investment Management announced that it is extending the EDGAR filing window on April 29, 2020, from 5:30 p.m. to 10:00 p.m., Eastern time, for registered investment company (RIC) and business development company (BDC) filings to mitigate potential filing delays due to the ongoing impacts of COVID-19. An RIC or BDC filing submitted after 5:30 p.m., Eastern time, would normally be considered to be filed the next business day, but the SEC has confirmed that it will adjust a filing’s date in EDGAR to reflect April 29 if submitted by 10:00 p.m., Eastern time. According to the announcement, this is a one-day extension only and, therefore, any RIC or BDC requiring a subsequent filing window extension should submit a request to

.

National Credit Union Association

NCUA Board Approves Changes to Capital; Business Lending Regulations

April 22, 2020

The Board of the National Credit Union Administration (NCUA) unanimously approved an interim final rule (IFR) that amends the agency’s regulations regarding capital adequacy and member business loans and commercial lending following the creation of the Small Business Administration’s Paycheck Protection Program (PPP). Under the IFR, if a loan is pledged as collateral for a non-recourse loan provided through the Federal Reserve System’s PPP Lending Facility, the covered loan can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio. The IFR also makes a conforming change to the definition of a commercial loan in the NCUA’s member business loans and commercial lending rule. Under the rule, PPP loans are excluded from the definition of a commercial loan because the unique nature of these loans mitigates the need for enhanced commercial underwriting.

Federal Housing Finance Agency

FHFA Announces that Enterprises will Purchase Qualified Loans in Forbearance to Keep Lending Flowing

April 22, 2020

The Federal Housing Finance Agency (FHFA) approved the purchase of certain single-family mortgages in forbearance that meet specific eligibility criteria by Fannie Mae and Freddie Mac (the GSEs). Mortgage loans either in forbearance or delinquent are ineligible for delivery under GSE requirements. The FHFA’s action lifts that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria. Eligible loans will also be priced to mitigate the heightened risk of loss to the GSEs from these loans.

International

European Commission

Commission Announces Measures to Support the Agri-Food Sector

April 22, 2020

The European Commission proposed additional measures to support agricultural and food markets most affected by the coronavirus. The package includes measures for private storage aid in the dairy and meat sectors, the authorization of self-organization market measures by operators in hard hit sectors and flexibility in fruits and vegetables, wine and some other market support programs.

Commission Proposes €3 Billion Macro-Financial Assistance Package to Support Ten Neighbouring Countries

April 22, 2020

The European Commission adopted a proposal for a €3 billion macro-financial assistance (MFA) package to ten enlargement and neighborhood partners to help them to limit the economic fallout of the coronavirus pandemic. The proposal provides for the MFA funds to be distributed as follows: the Republic of Albania (€180 million), Bosnia and Herzegovina (€250 million), Georgia (€150 million), the Hashemite Kingdom of Jordan (€200 million), Kosovo (€100 million), the Republic of Moldova (€100 million), Montenegro (€60 million), the Republic of North Macedonia (€160 million), the Republic of Tunisia (€600 million) and Ukraine (€1.2 billion). The MFA funds will be made available for 12 months in the form of loans on favorable terms to help these countries cover their urgent financing needs.

European Banking Authority

EBA Provides Further Guidance on the Use of Flexibility in relation to COVID-19 and Calls for Heightened Attention to Risks

April 22, 2020

The European Banking Authority (EBA) provided further clarity on how additional flexibility will guide supervisory approaches in relation to market risk, the Supervisory Review and Evaluation Process (SREP), recovery planning, digital operational resilience and information and communication technology risk and securitization. To mitigate the impact of volatility triggered by the COVID-19 pandemic on the prudential requirements for market risk, the EBA is proposing to adjust the capital impact by amending its standards on prudent valuation. In particular, the EBA is proposing to introduce the use of a 66% aggregation factor to be applied until December 31, 2020 under the so-called core approach. The EBA also intends to delay reporting for the first FRTB-SA figures to September 2021.

Bank of England

Bank of England Releases Statement on Increase to APF Gilt Lending Limits

April 22, 2020

The Bank of England, announced that, effective April 22, 2020, it will increase the proportion of gilts held in the Asset Purchase Facility that are made available to the UK Debt Management Office (DMO) to use in its market operations and for the DMO’s Standing and Special Repo Facilities.

Broadbent and Haldane Hold Agency Network Briefing on Bank’s Actions during COVID-19

April 22, 2020

Deputy Governor for Monetary Policy, Ben Broadbent, and Chief Economist, Andy Haldane, held a teleconference on April 20, 2020 to brief some of the contacts visited by the Bank of England’s (the Bank) Agents on the actions the Bank has taken to help firms and households manage through the uncertainty created by COVID-19 and reduce economic harm.

UK Financial Conduct Authority

FCA Releases Position Statement on Professional Indemnity Insurance for Financial Advisers

April 21, 2020

The Financial Conduct Authority (FCA) released a position statement on the impact the coronavirus crisis is having on professional indemnity insurance (PII) for financial advisers. The FCA’s position remains that firms need to have PII policies in place in accordance with our rules to support their ability to meet liabilities as they fall due and to protect their consumers.