FDIC’s proposal addresses deposit insurance assessment effects of PPP, PPPLF, and MMLF participation

Federal Issues FDIC SBA Federal Reserve Covid-19

On May 12, the FDIC announced a proposed rulemaking that addresses the deposit insurance assessment effects of participating in the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) and the Federal Reserve Board’s Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF). The FDIC notes that because PPP loans are fully guaranteed by the SBA, and PPPLF and MMLF transactions are conducted with the Board on a non-recourse basis, the proposed rule ensures that participating banks are not subjected to “significantly higher deposit insurance assessments.”

According to FDIC’s Financial Institution Letter, FIL-56-2020, the proposed rule would remove the effect of participating in the programs (i) on various risk measures used to calculate a bank’s assessment rate; (ii) on certain adjustments to a bank’s assessment rate; (iii) by providing an offset to a bank’s assessment for the increase to its assessment base attributable to participation in the MMLF and PPPLF; and (iv) when classifying banks as small, large, or highly complex for assessment purposes. The FDIC is proposing an effective date by June 30 with an application date of April 1 to ensure the changes cover assessments starting in the second quarter of 2020.

Comments on the proposed rule will be accepted for seven days after publication in the Federal Register.