PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update -- Wednesday, October 14, 2020
October 14, 2020
FedACTion Task Force
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Major Developments
SBA and Treasury Release New Set of Frequently Asked Questions Addressing Loan Forgiveness
October 13, 2020
The U.S. Small Business Administration (SBA), in consultation with the U.S. Department of the Treasury, has provided a new set of frequently asked questions (FAQs) and guidance to address borrower and lender questions concerning forgiveness of Paycheck Protection Program loans, as provided for under the CARES Act and amended by the Paycheck Protection Program Flexibility Act. The FAQs are divided into five categories: (i) General Loan Forgiveness; (ii) Loan Forgiveness Payroll Costs; (iii) Loan Forgiveness Nonpayroll Costs; (iv) Loan Forgiveness Reductions; and (v) Economic Injury Disaster Loans.
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 Bank of New York
Consumers’ Labor Market and Spending Expectations Improve
October 13, 2020
The Federal Reserve Bank of New York’s Center for Microeconomic Data released the September 2020 Survey of Consumer Expectations, which shows improvements in labor market and spending expectations, as well as less pessimistic views about households’ expected financial situation. Home price growth expectations returned to their pre-COVID-19 levels, and debt delinquency expectations remained low. In contrast, year-ahead household income expectations remain weak compared to the pre-COVID-19 period. Median inflation expectations remained unchanged at the short-term horizon, while it declined at the medium-term horizon. Uncertainty and disagreement about future inflation remain elevated.
Bank Liquidity Provision across the Firm Size Distribution
October 13,2020
The Federal Reserve Bank of New York has released a Staff Report titled “Bank Liquidity Provision across the Firm Size Distribution.” The authors investigate differences in the provision of bank liquidity across the range of firm sizes. Using supervisory data covering two-thirds of all commercial and industrial loans, including 50,000 small and medium enterprises (SMEs), they present five facts about differences in loan terms to large and small firms that reflect lender commitment to the former and discretion to the latter. The authors document that SMEs (i) obtain much shorter maturity credit lines than large firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both credit lines and term loans; (iv) have higher utilization rates in normal times; and (v) pay higher spreads, even conditional on other firm characteristics.
Estimates on Underlying Inflation Gauge
October 13, 2020
The Federal Reserve Bank of New York has released information regarding the Underlying Inflation Gauge, which captures sustained movements in inflation from information contained in a broad set of price, real activity, and financial data. For September 2020, trend CPI inflation is estimated to be in the 1.3% to 2.2% range, which is similar to the currently estimated August 2020 range of 1.3% to 2.1%. The COVID-19 outbreak continues to impact data collection for the CPI release.
Blog Post: How Have Households Used Their Stimulus Payments and How Would They Spend the Next?
October 13, 2020
The Federal Reserve Bank of New York’s Liberty Street Economics blog issued a post titled “How Have Households Used Their Stimulus Payments and How Would They Spend the Next?” The authors examine how households used economic impact payments, a large component of the CARES Act that directed stimulus payments to many Americans to help offset the economic fallout from the Coronavirus pandemic. The analysis shows that, as of the end of June 2020, a relatively small share of stimulus payments, 29%, was used for consumption, with 36% saved and 35% used to pay down debt. Reported expected uses for a potential second stimulus payment suggest an even smaller marginal propensity to consume, with households expecting to use more of the funds to pay down their debts.
Financial Crimes Enforcement Network
FinCEN Issues Advisory on Unemployment Insurance Fraud during the COVID-19 Pandemic
October 13, 2020
The Financial Crimes Enforcement Network issued an advisory to alert financial institutions to unemployment insurance (UI) fraud observed during the COVID-19 pandemic. The advisory contains descriptions of COVID-19 related UI fraud, associated financial red flag indicators and information on reporting suspicious activity.
FINRA
U.S. Investors Unfazed by Pandemic-Related Market Volatility: African American and Hispanic Investors Showed Greatest Increase in Interest in Investing
October 13, 2020
According to a new research study by the Financial Industry Regulatory Authority (FINRA) Foundation and NORC at the University of Chicago, despite dramatic market volatility related to the COVID-19 pandemic during early 2020, investor optimism about the stock market remained high. One in five Americans indicated an increased interest in investing. Low levels of investment knowledge underscore the need for additional investment education opportunities, especially among African Americans and Hispanics, the research shows.
International
European Commission
European Commission Statement on the Coordination of Measures Restricting Free Movement in the European Union related to the Coronavirus Pandemic
October 13, 2020
European Union (EU) ministers have reached an agreement that will provide more clarity and predictability on measures that restrict free movement due to the coronavirus pandemic, following the proposal of the European Commission on September 4, 2020. All information about travelling in the EU will be available on the “Reopen EU” platform, where the common map published regularly by the European Centre for Disease Prevention and Control will also be cross-referenced.
State Aid: Commission Prolongs and Expands Temporary Framework to Further Support Companies Facing Significant Turnover Losses
October 13, 2020
The European Commission has decided to prolong and extend the scope of the State Aid Temporary Framework adopted on March 19, 2020 to support the economy in the context of the coronavirus outbreak. All sections of the Temporary Framework are prolonged for six months until June 30, 2021, and the section to enable recapitalization support is prolonged for three months, until September 30, 2021.