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PH FedACTion: Financial Regulatory Updates

Daily Financial Regulation Update -- Saturday, July 18, 2020

By
FedACTion Task Force
On Jul 18, 2020

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Major Developments

Federal Reserve Expands Main Street Lending Program Establishing New Facilities for Nonprofit Organizations such as Educational Institutions, Hospitals, and Social Service Organizations

July 17, 2020

The Federal Reserve (FRB) augmented the Main Street Lending Program (Program) to add two new loan facilities to provide credit to nonprofit organizations such as educational institutions, hospitals and social service organizations. As detailed in the terms sheets, the FRB approved two new loan options (Nonprofit Organization New Loan Facility and Nonprofit Organization Expanded Loan Facility) to provide support to a broad set of nonprofit organizations that were in sound financial condition prior to the COVID-19 pandemic. The Main Street nonprofit loan terms generally mirror those for Main Street for-profit business loans but have varying eligibility requirements tied to, among others, a lower headcount threshold, total non-donation revenues, operating margin, cash reserves and debt repayment capacity.

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.

Federal Agencies

Federal Reserve Board

Reconciling Unemployment Claims with Job Losses in the First Months of the COVID-19 Crisis

July 17, 2020

The Divisions of Research & Statistics and Monetary Affairs of the Federal Reserve Board released a paper titled “Reconciling Unemployment Claims with Job Losses in the First Months of the COVID-19 Crisis.” The authors analyze the relationship between unemployment insurance benefits claims in the Spring of 2020 and underlying employment and argue that insured unemployment, an alternative high-frequency indicator that responds to gross job gains as well as gross job losses, offers important advantages as a barometer of labor market conditions. The authors show that insured unemployment commoved strongly with payroll employment through the first months of the COVID-19 pandemic, as it did during the Great Recession.

Federal Reserve Bank of New York

It’s What You Say and What You Buy: A Holistic Evaluation of the Corporate Credit Facilities

July 17, 2020

The Federal Reserve Bank of New York release a staff report titled “It’s What You Say and What You Buy: A Holistic Evaluation of the Corporate Credit Facilities.” The authors document that the Federal Reserve’s announcement of the Primary and Secondary Market Corporate Credit Facilities had an immediate positive impact on prices and liquidity in corporate bond markets. They also find that the improvement in corporate credit markets can be attributed both to the effect of Federal Reserve intervention announcements on the economy more broadly as well as to the facilities specifically.

MBS Market Dysfunctions in the Time of COVID-19

July 17, 2020

The Federal Reserve Bank of New York released a blog post titled “MBS Market Dysfunctions in the Time of COVID-19.” The COVID-19 pandemic elevated financial market illiquidity and volatility. The mortgage-backed securities (MBS) market, which plays a critical role in the housing market by funding the vast majority of U.S. residential mortgages, also suffered a period of dysfunction. The authors discuss a particular aspect of MBS market disruption by showing how a long-standing relationship between spot and forward markets broke down, and they highlight the Federal Reserve’s innovative response to the breakdown.

Commodity Futures Trading Commission

CFTC Extends Targeted Relief to Market Participants in Response to COVID-19

July 17, 2020

The Commodity Futures Trading Commission’s (CTFC) Division of Swap Dealer and Intermediary Oversight (DSIO) announced that, in light of the continuing challenges resulting from the COVID-19 pandemic, it has extended the time period for the targeted no-action relief provided in CFTC Staff Letter No. 20-16 to registrants listing new principals and to applicants for registration as associated persons (APs) from the requirement to submit a fingerprint card for any such principal or AP registration applicant. Until September 30, 2020, or until such earlier date as the National Futures Association notifies the public it has resumed the processing of fingerprints, a fingerprint card for a newly-listed principal or an applicant for AP registration does not need to be submitted, provided certain conditions are met.

U.S. Small Business Administration

SBA Proposes New Community Advantage Recovery Loans

July 17, 2020

The U.S. Small Business Administration published a request for information and a notice on the establishment of new, temporary community advantage (CA) loans in response to the COVID-19 pandemic. The new loans, titled “Community Advantage Recovery Loans,” are designed for eligible CA lenders to provide technical and financial assistance to assist small businesses in underserved areas who need to retool their business models for the COVID-19 pandemic. The SBA-guaranteed loans will be available through September 27, 2020 and must be fully disbursed no later than October 1, 2020.

International

UK Financial Conduct Authority

FCA Seeks Views on Extending the Implementation Deadlines for the Certification Regime and Conduct Rules

July 17, 2020

The Financial Conduct Authority (FCA) published a consultation paper on making changes to its rules following the extension to the deadline by which FCA solo-regulated firms need to have implemented the Certification Regime. In June 2020, the Treasury announced that the deadline by which firms must have first assessed the fitness and propriety of their Certified Staff will be delayed until March 31, 2021.