PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Tuesday, May 5, 2020
May 05, 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
Treasury and SBA Update Paycheck Protection Program FAQs
May 3, 2020
The U.S. Department of the Treasury and the Small Business Administration (SBA) have updated their Frequently Asked Questions (FAQs) on the Paycheck Protection Program (PPP).
The updated FAQs confirm:
(i) a borrower’s PPP loan forgiveness amount will not be reduced if the borrower laid off and then offered to rehire an employee, but the employee declined the offer, as long as the borrower made a good faith written offer of rehire and the employee’s rejection is documented by the borrower (FAQ 40);
(ii) a seasonal employer that elects to use a 12-week period between May 1, 2019 and September 15, 2019 to calculate its maximum PPP loan amount can make all the required certifications on the Borrower Application Form (FAQ 41); and
(iii) the SBA will treat a nonprofit hospital exempt from taxation under Section 115 of the Internal Revenue Code of 1986 (IRC) as a “nonprofit organization” under Section 1102 of the CARES Act if the hospital reasonably determines, in a written record maintained by the hospital, that it is an organization described in Section 501(c)(3) of the IRC (FAQ 42).
New York Fed Releases Additional Information on Primary Market and Secondary Market Corporate Credit Facilities in Preparation for Series of May Launches
May 4, 2020
The Federal Reserve Bank of New York released an expanded set of Frequently Asked Questions (FAQs) regarding the Primary Market Corporate Credit Facilities (PMCCF) and Secondary Market Corporate Credit Facilities (SMCCF). The FAQs include information on the eligibility of issues and issuers, guidance on compliance with CARES Act requirements, and terms applicable to underwriting for new issue syndications. The FAQs also provide guidance for the PMCCF and SMCCF, as well as other Federal Reserve emergency lending programs, including the Main Street Lending Program, for such things as the meaning of “significant operations in the United States” and confirmation that U.S. subsidiaries of foreign corporations may be eligible to participate in such programs, assuming such U.S.-based subsidiaries meet the applicable program’s eligibility requirements. The FAQs note that additional information on the PMCCF and SMCCF will be forthcoming, including specific start dates, issuer certification requirements and more detailed operational information.
Congress
Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, 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 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.
Federal Agencies
Department of the Treasury
Treasury Announces Marketable Borrowing Estimates
May 4, 2020
The U.S. Department of the Treasury (Treasury) announced its current estimates of privately-held net marketable borrowing for the remaining quarters for the fiscal year ending September 30, 2020. During the April through June 2020 quarter, Treasury expects to borrow $2.99 trillion in privately-held net marketable debt, assuming an end-of-June cash balance of $800 billion. The increase in privately-held net marketable borrowing is primarily driven by the impact of the COVID-19 pandemic, including expenditures from new economic stimulus legislation to assist individuals and businesses, changes to tax receipts, including the deferral of individual and business taxes from April until July, and an increase in the assumed end-of-June Treasury cash balance. During the final quarter of the fiscal year ending September 30, 2020, Treasury expects to borrow $677 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion.
Assistant Secretary Michael Faulkender Economy Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association
May 4, 2020
Assistant Secretary Michael Faulkender issued an economy statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association. The statement discusses the COVID-19 pandemic and its impact on GDP, labor markets and wages and pricing, as well as the U.S. government’s expansionary fiscal and monetary policy.
Small Business Administration
SBA authorizes Economic Injury Disaster Loans for U.S. Agricultural Businesses Impacted by COVID-19 Pandemic
May 4, 2020
U.S. Small Business Administration (SBA) Administrator Jovita Carranza announced that agricultural businesses are now eligible for SBA’s Economic Injury Disaster Loan (EIDL) and EIDL Advance programs. SBA’s EIDL portal re-opened on May 4, 2020 as a result of funding authorized by Congress through the Paycheck Protection Program and Healthcare Enhancement Act. The law provided additional funding for farmers and ranchers and certain other agricultural businesses affected by the COVID-19 pandemic.
Securities and Exchange Commission
SEC Provides Temporary and Conditional Relief to Allow Small Businesses to Pursue Expedited Crowdfunding Offerings
May 4, 2020
The Securities and Exchange Commission announced that it is providing temporary, conditional relief for established smaller companies affected by COVID-19 that may look to meet their urgent funding needs through a Regulation Crowdfunding offering. These actions will expedite the offering process for eligible companies by providing relief from certain rules with respect to the timing of a company's offering and the financial statements required. To take advantage of the temporary rules, a company must meet enhanced eligibility requirements and provide clear, prominent disclosure to investors about its reliance on the relief. The relief will apply to offerings launched between the effective date of the temporary rules and August 31, 2020.
Remarks on the Importance of Disclosure for the SEC’s Municipal Markets
May 4, 2020
Securities and Exchange Commission Chairman Jay Clayton and Rebecca Olsen, Director in the Office of Municipal Securities, issued a public statement regarding the importance of disclosure for the SEC’s municipal markets. The statement is directed to issuers of municipal securities as well as investors and market participants more generally, and is intended to parallel the statement issued by the Chairman and the Director of the Division of Corporate Finance, which included observations and requests about the disclosures of public companies in light of the effects and uncertainties created by COVID-19.
Remarks to the Special Meeting of the Investor Advisory Committee
May 4, 2020
Securities and Exchange Commission Chairman Jay Clayton issued remarks to the special meeting of the Investor Advisory Committee. His remarks focused on the importance of keeping investors and markets apprised about the evolving impact of, and responses to, COVID-19 and the importance of timely, accurate and decision-useful information. He also emphasized the need for issuers to make reasonable efforts to disclose material information to investors such as: (i) how long a business can sustain its current operating posture in the absence of additional funding; (ii) whether distribution and supply chains have been temporarily or permanently disrupted; and (iii) how the company plans to manage employees’ and customers’ health and safety as it seeks to increase activity.
Federal Housing Finance Agency
FHFA Announces Tools to Help Renters Find Out if They are Protected from Eviction
May 4, 2020
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) have created online multifamily property lookup tools to help renters find out if they are protected from evictions during the COVID-19 national health emergency. The property lookup tools allow renters to find out if the multifamily property where they reside has an Enterprise-backed mortgage. Under the CARES Act, renters living in a property with an Enterprise-backed mortgage are covered by a temporary eviction moratorium. Landlords with Enterprise-backed mortgages can enter forbearance if their tenants cannot pay due to COVID-19 loss of income.
Fannie Mae
MBS Disclosure Enhancement: Borrower Assistance Plans and Delinquency
May 4, 2020
Fannie Mae and Freddie Mac (the Enterprises) will begin publishing disclosure information related to borrower-assistance plans and delinquency in Enterprise securities.
Department of Labor
U.S. Department of Labor Issues Additional Guidance About Short-Time Compensation Program Provisions
May 4, 2020
The U.S. Department of Labor issued additional CARES Act-related guidance. The guidance concerns 100% federal reimbursement of certain state Short-Term Compensation (STC) payments, as well as other changes to STC programs.
Conference of State Bank Supervisors
CSBS Asks OCC to Withdraw Licensing Amendment Proposal
May 4, 2020
The Conference of State Bank Supervisors (CSBS) issued a comment letter recommending that the Office of the Comptroller of the Currency (OCC) withdraw its proposed rule to amend its licensing rules for national banks until after the global COVID-19 pandemic has abated. The letter says that the CSBS does not understand how the OCC could conclude that it is an appropriate time to issue a more than 60,000-word proposed rule, which contains 2,000 amendments. In addition, the OCC made an unusual step to mark the start of the 60-day comment period for the rule from the date the proposal was posted on the OCC website rather than, as is customary, when it was published in the Federal Register, giving the public even less time to comment.
International
European Commission
Coronavirus: Commission Adopts Package of Measures to Further Support the Agri-food Sector
May 4, 2020
The European Commission (Commission) published the latest package of measures to further support the agricultural and food sectors most affected by the COVID-19 crisis. The measures (previously announced on April 22, 2020) include private storage aid for the dairy and meat sectors, the temporary authorization to self-organize market measures by operators in hard hit sectors, and flexibility in the implementation of market support programs.
European Banking Authority
Joint Regulatory Technical Standards on Amendments to the Bilateral Margin Requirements under EMIR in Response to the COVID-19 Pandemic
May 4, 2020
In response to the COVID-19 pandemic, the European Supervisory Authorities published joint draft Regulatory Technical Standards to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared OTC derivatives (bilateral margining), under the European Markets Infrastructure Regulation (EMIR), to incorporate a one-year deferral of the two implementation phases of the bilateral margining requirements.
EBA publishes Final Draft Technical Standards on Specific Reporting Requirements for Market Risk
May 4, 2020
The European Banking Authority (EBA) published its final draft Implementing Technical Standards (ITS) on specific reporting requirements for market risk. The specific reporting requirements for market risk include a thresholds template, providing insights into the size of institutions’ trading books and the volume of their business subject to market risk, and a summary template, reflecting the own funds requirements under the alternative standardized approach for market risk (MKR-ASA). The reporting requirements are expected to apply beginning in September 2021.
Bank of England Prudential Regulatory Authority
Statement on Credit Risk Mitigation Eligibility and Leverage Ratio Treatment of Loans under the Bounce Back Loan Scheme
May 4, 2020
The statement sets out the Prudential Regulatory Authority’s (PRA) observations on the risk weighted treatment of exposures under the COVID-19 Bounce Back Loan Scheme (BBLS), particularly eligibility for recognition as unfunded credit risk mitigation under the Capital Requirements Regulation. It also sets out a change to the UK leverage ratio framework. The PRA is offering a modification by consent for banks subject to the UK Leverage Ratio Part of the PRA Rulebook to exclude loans under the BBLS from the leverage ratio total exposure measure, if they choose to do so.
UK Financial Conduct Authority
Updated Statement on the UK Coronavirus Business Interruption Loan Scheme and the New Bounce Back Loan Scheme
May 4, 2020
The Financial Conduct Authority issued a statement concerning its approach to its regulation of firms in relation to the UK’s Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). The statement applies to any loan made under the CBILS or BBLS by an accredited lender from May 4, 2020.
FCA letter to Financial Ombudsman Service regarding CBILS and BBLS
Financial Ombudsman Service's response to FCA regarding CBILS and BBLS, 4 May 2020
Digital Sandbox – COVID-19 Pilot
May 4, 2020
The Financial Conduct Authority (FCA) announced that it is piloting a “digital sandbox”, which would enhance key features of the FCA’s innovation services, allowing firms to test and develop proofs of concept in a digital testing environment. The sandbox will provide enhanced regulatory support to firms tackling challenges caused by the COVID-19 pandemic.