PH FedACTion: Financial Regulatory Updates

Daily Financial Regulation Update -- Thursday, July 16, 2020

July 16, 2020

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Major Developments

Federal Reserve Updates Main Street Lending Program FAQs

July 15, 2020

The Federal Reserve issued a revised version of the Main Street Lending Program’s Frequently Asked Questions (FAQs), addressing the following matters:

  • Waiving CARES Act capital distribution restrictions with respect to tribal businesses paying dividends to tribal governments (FAQs H.15, H.2) and otherwise clarifying the tribal business concern definition (FAQ E.2);

  • Incorporating recent changes made by the Small Business Administration to its “Ineligible Business” definition in relation to the Paycheck Protection Program (FAQ E.1) and otherwise clarifying the application of the Ineligible Business definition to prospective borrowers (FAQ E.13);

  • Removing the “purchase by” requirement with respect to MSELF Upsized Tranches (FAQ D.4);

  • Providing guidance regarding a number of issues – specifically,

    • The inclusion of fees in the principal amount of loan (FAQ G.18),

    • LIBOR floors (FAQ G.19),

    • Financial requirements for businesses established in 2020 (FAQ G.20),

    • Fiscal year 2019 financial data (FAQ H.10),

    • The use of proceeds under Main Street loans (FAQ G.21),

    • The eligibility of sole proprietorships (FAQ E.14), and

    • Hedging credit and interest rate risk (FAQ G.26);

  • Providing clarity on Portal information security measures (FAQ L.10);

  • Providing links to example legal documents completed for a hypothetical company (FAQ M.5); and

  • Clarifying the mortgage debt exception for the Main Street Priority Loan Facility (MSPLF) and Main Street Expanded Loan Facility (MSELF) (FAQs C.5 and D.11).

  • Updated Main Street FAQs

  • Marked version of Main Street FAQs to show current changes

Federal Reserve Board Revises Regulation O to Implement the Paycheck Protection Program

July 15, 2020

The Federal Reserve temporarily modified Regulation O so that certain bank directors and shareholders can apply to their banks for PPP loans for their small businesses. The SBA clarified in April that PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, subject to certain limits, and without favoritism. The Federal Reserve’s rule change will allow those individuals to apply for PPP loans, consistent with the SBA’s rules and restrictions. The change only applies to PPP loans.


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. House of Representatives

Committee on Financial Services

Chairwoman Waters Announces Additional July Hearings

July 14, 2020

Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services (Committee), announced the following additional hearings in the month of July:

  • July 23, 10:30 AM Eastern –The full Committee will convene for a hearing titled, “The Heroes Act: Providing for a Strong Economic Recovery from COVID-19.”

  • July 30, 12:30 PM Eastern –The full Committee will convene for a hearing titled, “Protecting Consumers during the Pandemic? An Examination of the Consumer Financial Protection Bureau.”

  • News Release

Committee on Small Business

Committee Holds Hearing Seeking Solutions for Small Business Recovery

July 15, 2020

The House Small Business Committee held a hearing examining additional legislative solutions to help small businesses recover in the wake of the COVID-19 crisis. The virtual hearing covered relief efforts put in place during the Great Recession to aid small businesses, current programs implemented since the start of the crisis and ideas for initiatives to help small businesses moving forward.

Federal Agencies

Federal Reserve Board

Federal Reserve Issues Summary of Commentary on Current Economic Conditions by Federal Reserve District

July 15, 2020

The Federal Reserve Board released a national summary of commentary on current economic conditions by Federal Reserve District (District). The summary indicates that economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic. Consumer spending picked up as many nonessential businesses were allowed to reopen. Retail sales rose in all Districts, led by a rebound in vehicle sales and sustained growth in the food and beverage and home improvement sectors. Leisure and hospitality spending improved, but was far below year-ago levels. Most Districts reported that manufacturing activity moved up, but from a very low level.

Demand for professional and business services increased in most Districts, but was still weak. Transportation activity rose overall on higher truck and air cargo volumes. Construction remained subdued, but picked up in some Districts. Home sales increased moderately, but commercial real estate activity stayed at a low level. Financial conditions in the agriculture sector continued to be poor, while energy sector activity fell further because of limited demand and oversupply. Loan demand was flat outside of some Paycheck Protection Program (PPP) activity and increased residential mortgages. The PPP and loan deferrals by private lenders reportedly provided many firms with sufficient liquidity for the near term. Outlooks remained highly uncertain, as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications.

Federal Reserve Bank of New York

Speech Addressing the Federal Reserve’s Market Functioning Purchases: From Supporting to Sustaining

July 15, 2020

Lorie K. Logan, Executive Vice President of the Federal Reserve Bank of New York, gave a speech at the Securities Industry and Financial Markets Association webinar titled “The Federal Reserve’s Market Functioning Purchases: From Supporting to Sustaining.”

Empire State Manufacturing Survey

July 15, 2020

The Federal Reserve Bank of New York released the Empire State Manufacturing Survey for July 2020. Business activity increased in New York State for the first time in several months, according to firms responding to the survey. The general business conditions index rose to 17.2, its first positive reading since February. New orders and shipments also increased, and unfilled orders were steady. Delivery times were somewhat longer, and inventories declined. Employment levels and the average workweek were little changed. Input price increases were not much different than last month, while selling prices edged lower. Firms responding to the survey remained optimistic about the six-month outlook, though less so than in June.

Conference of State Bank Supervisors

Community Bankers Adjusting to a New Reality

July 15, 2020

The Conference of State Bank Supervisors recently reported that the latest quarterly value for the Community Bank Sentiment Index was 90. The value is mostly unchanged from the previous historic low reading of 91 in March 2020, and down considerably from last year’s index of 122. The latest survey indicates that community bankers from across the nation remain unsettled and continue to have a mostly negative sentiment as a result of the COVID-19 pandemic and subsequent economic disruptions.

Securities and Exchange Commission

Credit Ratings, Procyclicality and Related Financial Stability Issues: Select Observations

July 15, 2020

On April 24, the Securities and Exchange Commission announced the formation of an internal, interdisciplinary COVID-19 Market Monitoring Group. The public statement issued by the COVID-19 Market Monitoring Group sets forth several initial observations concerning ratings actions, procyclicality and financial stability issues.

SEC Chairman’s Remarks to the Financial Stability Oversight Council on COVID-19 Initiatives

July 14, 2020

Securities and Exchange Commission Chairman Jay Clayton gave remarks to the Financial Stability Oversight Council on market activity in June and July 2020 and the function and initiatives of the COVID-19 Market Monitoring Group.


National Credit Union Administration

NCUA No Longer Accepting Applications for COVID-19 Urgent Need Grants

July 15, 2020

The National Credit Union Administration (NCUA) announced that funding for COVID-19 urgent need grants have been fully utilized and new applications will no longer be accepted. The NCUA will complete the review process for COVID-19 urgent need grant applications that are currently pending, and it will notify credit unions of its decisions on those applications by email. Urgent need grants remain available for events not related to the COVID-19 pandemic.

Update to NCUA’s 2020 Supervisory Priorities

July 15, 2020

The National Credit Union Administration (NCUA) issued a letter to federally insured credit unions on updates to the NCUA’s 2020 supervisory priorities to reflect economic conditions that emerged in response to the COVID-19 pandemic, as well as various statutory and regulatory changes that have occurred since March 2020.


Bank of England

COVID-19 and the Economy: What are the Lessons So Far?

July 15, 2020

Silvana Tenreyro, External Member of the Monetary Policy Committee for the Bank of England, gave a speech in which she examines the recent amount of new research on understanding the economic impact of COVID-19. She discusses insights learned from the research and issues that still need to be explored.

UK Financial Conduct Authority

FCA Confirms Further Support for Motor Finance and High-Cost Credit Customers

July 15, 2020

The Financial Conduct Authority confirmed the support measures that will be available for users of motor finance, buy-now pay-later, rent-to-own, pawnbroking and high-cost short-term credit products, who continue to face payment difficulties due to COVID-19. The guidance goes into effect on July 17, 2020.

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