PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Tuesday, June 9, 2020
June 09, 2020
FedACTion Task Force
Subscribe to PH FedACTion: Financial Regulatory Updates
PH Client Alerts
Click here to read more from our Coronavirus series.
Major Developments
Federal Reserve Board Revises and Expands the Main Street Lending Program
June 8, 2020
The Board of Governors of the Federal Reserve System (FRB) expanded the Main Street Lending Program (Program) to allow more small and medium-sized businesses to receive support under the Program by lowering the minimum loan amount for certain Program loans from $500,000 to $250,000, and raising the maximum loan amounts. Moreover, the FRB adjusted the loan repayment schedule, providing for a two-year payment deferral before any payments are due, and changing the repayment schedule to 15% after years three and four and 70% after year five, in an effort to provide borrowers with greater flexibility in repaying loans made under the Program. Moreover, the FRB correlated all three announced loan programs, by announcing it would purchase a 95% participation interest in all types of Main Street Loans. The FRB expects the Program to be open for lender registration soon, and will actively buy loans shortly afterwards. In addition the FRB noted that it plans to stand up a new Main Street program for non-profits in the near future. Finally, the FRB issued revised and expanded FAQs implementing the Main Street Lending Programs.
New York Fed Releases Updated TALF FAQs and Documents
June 8, 2020
The Federal Reserve Bank of New York (New York Fed) released updated FAQs for the Term Asset-Backed Securities Loan Facility (TALF), along with updated forms of the following documents: Issuer and Sponsor Certification as to TALF Eligibility for ABS; Sponsor Indemnity Undertaking; Auditor Attestation; Management Report on Compliance; and, updated Guidance for Accounting Firms in Determining TALF Collateral Eligibility for ABS.
Among other changes, the updated FAQs specify that with respect to asset-back securities (ABS) issued on or after March 23, 2020 and before May 22, 2020, in advance of submitting any loan requests for the June 17, 2020 subscription date only, the CUSIP number and a copy of the final prospectus or offering document must be submitted by the issuer to the New York Fed by June 11, 2020, and all other documentation must be submitted by June 15, 2020.
Form of Auditor Attestation; Form of Management Report on Compliance
Guidance for Accounting Firms in Determining TALF Collateral Eligibility for ABS
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. House of Representatives
Committee on Small Business
Chairwoman Velázquez Announces June Hearings
June 8, 2020
Congresswoman Nydia M. Velázquez (D-NY), Chairwoman of the House Small Business Committee (Committee), announced several remote Committee hearings for the month of June:
Wednesday, June 10, 2020 – 1:00 P.M.- Remote Hearing: The Economic Injury Disaster Loan Program: A View from Main Street
Wednesday, June 17, 2020 – 1:00 P.M.- Remote Hearing: Paycheck Protection Program: Loan Forgiveness and Other Challenges
Wednesday, June 24, 2019 – 1:00 P.M.- Remote Hearing: An Overview of the Dynamic Between the Defense Production Act and Small Contractors (Subcommittee on Contracting and Infrastructure)
Hearings will be posted on the Committee’s website one week in advance. Witness testimony will be posted within 24 hours after the hearing’s occurrence.
Federal Agencies
Department of the Treasury
Mnuchin, Carranza Issue Joint Statement Regarding Forgiveness Provisions Enacted Under PPP Flexibility Act
June 8, 2020
U.S. Secretary of the Treasury Steven T. Mnuchin and Small Business Administration Administrator Jovita Carranza issued a joint statement following the enactment of the Paycheck Protection Program (PPP) Flexibility Act (Flexibility Act). The Joint Statement noted that the SBA, in consultation with Treasury, will be issuing rules and guidance, a modified borrower application and a modified loan forgiveness application to reflect the Flexibility Act, which lowered the requirements that 75% of loan proceeds be used for payroll costs to 60%. The new rules and guidance will address a drafting error in the Flexibility Act and will permit loan forgiveness if 60% of loan proceeds are used for payroll costs and will clarify that partial loan forgiveness will continue to be available.
Federal Reserve Bank of New York
Center for Microeconomic Data Releases May 2020 Survey of Consumer Expectations
June 8, 2020
The New York Fed’s Center for Microeconomic Data released the May 2020 Survey of Consumer Expectations (Survey), which showed small signs of improvement in households’ expectations compared to April 2020. According to the Survey, consumers grew comparatively more optimistic about labor market outcomes with earnings growth, job finding, and job loss expectations all slightly improving, but remaining far off pre-COVID-19 levels. The Survey also showed improvements in expected income and spending growth, and the probability of missing a future minimum debt payment. On the other hand, according to the Survey, perceived and expected availability of credit continued to worsen. The Survey showed that median inflation expectations increased at the one-year horizon, and remained stable at the three-year horizon.
Department of Labor
Department of Labor Awards Additional DWGs
June 8, 2020
The Department of Labor announced the award of three Dislocated Worker Grants (DWGs), totaling $16,836,480, to help address workforce-related impacts of COVID-19. The CARES Act provided $345 million for DWGs to prevent, prepare for, and respond to COVID-19. The latest award follows five previous waves of funding, bringing the total amount awarded to states and territories to $238,881,438.
International
European Commission
EU Grants €314 million to Companies to Combat COVID-19, Support Recovery
June 8, 2020
The European Commission announced it has awarded nearly €166 million, via the European Innovation Council (EIC) Accelerator Pilot, to 36 companies, to assist the companies’ efforts in combatting COVID-19. An additional €148 million will be granted to another 36 companies set to contribute to the recovery plan for Europe, bringing the total investment from Horizon 2020, the EU's research and innovation program, to €314 million.
European Banking Authority
EBA Releases Bank-by-Bank Data at the Start of COVID-19
June 8, 2020
The European Banking Authority (EBA) published the seventh European Union (EU)-wide transparency exercise. This additional data disclosure comes as a response to the outbreak of COVID-19 and provides market participants with bank-level data as of December 31, 2019, prior to the start of the crisis. The data confirms the EU banking sector entered the crisis with solid capital positions and improved asset quality, but also shows the significant dispersion across banks.
Bank of England
Bank Publishes Article on Economic Effects of COVID-19
June 8, 2020
The Bank of England (Bank) published an article exploring COVID-19’s effects on economic activity and inflation. The Bank’s article found that COVID-19, and public health measures aimed at containing it, temporarily reduce spending and production, and that these effects can be amplified by factors such as increased uncertainty. The Bank’s article found that COVID-19’s impact on inflation is uncertain.
Bank of England Prudential Regulatory Authority
Bank and PRA Issue Joint Statement on ESRB Recommendations on Restricting Distributions during COVID-19
June 8, 2020
The Bank and the Prudential Regulation Authority (PRA) issued a joint statement in which they noted the recommendation of the European Systemic Risk Board on the restriction of distributions during COVID-19. In their joint statement, the Bank and PRA noted that they have previously announced a number of measures designed to ensure the resilience of the financial system and financial market infrastructures, support banks’ lending during COVID-19, and maintain the safety and soundness of firms.