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Federal agencies extend Volcker Rule comment period
On April 2, the Federal Reserve Board, CFTC, FDIC, OCC, and SEC (agencies) jointly announced that they would extend the comment period to May 1 on their proposal to modify and streamline the “covered funds” requirements under Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule. As previously covered by InfoBytes, the proposed amendments would, among other things, clarify the regulations concerning covered funds and address certain related issues, including permitting the activities of qualifying foreign excluded funds. The comment period originally was scheduled to end April 1. However, due to potential disruptions as a result of the Covid-19 pandemic, the agencies agreed to extend the comment deadline to May 1.
OCC, FDIC outline SBA relief programs pursuant to the CARES Act
On April 2, the OCC issued Bulletin 2020-31 and the FDIC issued Financial Institution Letter (FIL) 33-2020 to highlight for banks the SBA-relief programs available pursuant to the CARES Act. The bulletin urges banks to utilize the programs to help small businesses that have been financially impacted by Covid-19, adding that the SBA “is streamlining its eligibility criteria and processes to enable more financial institutions to use these programs for eligible small business borrowers.” The guidance highlights three relief programs, including (i) the Paycheck Protection Program (PPP), which is “an expansion of the SBA’s 7(a) loan program” and provides SBA-guaranteed loans to eligible borrowers; (ii) the Economic Injury Disaster Loan and Loan Advance Program, which is also an expansion of a current SBA program—the disaster assistance loan program—where borrowers may receive a loan of up to $2 million for working capital, and up to $10,000 as an advance that the borrower is not required to repay; and (iii) the Debt Relief Program, which provides 6 months of principal, interest and fees on 7(a) loans already in existence or originated prior to September 27.
Additional information on PPP loans can be found on the SBA website here and on the Treasury Department website here. Information about other SBA resources can be found here, and on the FDIC’s Coronavirus Information page here.
Oklahoma State Banking Department issued FAQs from financial institutions affected by Covid-19
In late March, the Commissioner of the Oklahoma State Banking Department issued FAQs as a supplement to FAQs issued earlier by the FDIC. The FAQs address: (i) working with borrowers, and appropriately documenting the credit file; (ii) closing a lobby but maintaining drive through service; (iii) access to safe deposit boxes; (iv) conducting board meetings remotely, and (v) bank examinations.
FDIC issues statement on Part 363 annual reports in response to Covid-19
On March 27, the FDIC issued a Financial Institution Letter providing additional information and guidance to insured depository institutions (IDIs) subject to Part 363 of the FDIC regulations that have been affected by Covid-19. The FDIC will not take supervisory action against an IDI for submitting its Part 363 Annual Report or its written notification of late filing as long as the annual report or notification of late filing is submitted within 45 days of the 90- or 120-day report filing deadline. IDIs are encouraged to contact the FDIC in advance of the official filing date if the IDI anticipates delayed submission. This letter applies to all insured depository institutions with $500 million or more in total assets.
Federal agencies announce measures to encourage consumer and business lending
On March 27, the Federal Reserve Board (Fed), the FDIC and the OCC jointly announced two measures the agencies have put in place to “support lending to households and businesses” during the Covid-19 pandemic. First, effective immediately, the agencies will “[a]llow[] early adoption of a new methodology on how certain banking organizations are required to measure counterparty credit risk derivatives contracts.” Second, the agencies will “[p]rovid[e] an optional extension of the regulatory capital transition for the new credit loss accounting standard.”
The first measure deals with the Standardized Approach for Calculating the Exposure Amount of Derivative Contracts (SA-CCR), which had an effective date of April 1. Allowing early adoption for the quarter ending on March 31 may “improve current market liquidity and smooth disruptions” caused by the Covid-19 pandemic. Further, the interim final rule for Current Expected Credit Losses (CECL)—the second measure—was released to minimize the effect of the “CECL accounting standard [on] regulatory capital.” In addition to the transition period of three years already available, the interim final rule—Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances—provides up to two more years to “mitigate the estimated cumulative regulatory capital effects” of CECL. Comments on the interim final rule must be submitted by May 11. (See OCC News Release 2020-42 here and FDIC press release here.)
FDIC requests 2019 diversity self-assessments through new automated portal
On March 23, the FDIC issued FIL-23-2020 to announce a request from the agency’s Office of Minority and Women Inclusion for 2019 diversity self-assessments from FDIC-regulated financial institutions in accordance with Section 342 of the Dodd-Frank Act. Financial institutions with 100 or more employees should refer to the FIL for instructions on completing the voluntary self-assessment. The FDIC strongly encourages financial institutions to use the new automated portal: Diversity Self-Assessment of FDIC Regulated Financial Institutions when completing self-assessments, as it allows for multiple authorized users and the ability to view previous submissions, as well as provides additional resources for participants. Self-assessments are due May 31.
FDIC updates guidance on protecting banks and consumers
On March 27, the FDIC announced an update to guidance it issued on March 16 regarding “steps to protect banks and consumers and to continue operations.” Among the updates, the agency (i) extended telework for all FDIC employees from March 30 until at least April 12; (ii) expanded the period of time the agency will conduct “[s]upervisory and other FDIC activities” off-site through April 12; and (iii) encouraged institutions to communicate with their “Examiner-in-Charge or Regional Director” if they anticipate delays in responding to “normal supervisory requests.”
Federal agencies permit early adoption of standardized approach for counterparty credit risk
On March 26, the OCC, Federal Reserve System, and FDIC issued a notice permitting depository institutions and depository institution holding companies to implement the final rule titled Standardized Approach for Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) for the first quarter of 2020, on a best efforts basis. A banking organization that elects to adopt the SA-CCR methodology must adopt the methodology for all derivative contracts; a banking organization cannot implement the SA-CCR methodology for a subset of its derivative contracts. A banking organization may adopt some of the technical amendments described in the rule regardless of whether the banking organization chooses to early adopt the SA-CCR methodology. The SA-CCR rule effective date remains April 1, 2020, and the mandatory compliance date remains January 1, 2022.
FDIC details temporary alternative procedures for supervision-related communications
On March 26, the FDIC released a letter detailing temporary alternative procedures for sending supervision-related mail and email to the FDIC. The letter applies to all FDIC-supervised institutions with total assets under $1 billion. The letter provides that the FDIC will use its Secure Email portal to send outgoing official supervisory correspondence, and encourages third parties (including for official business purposes related to supervisory matters) to send mail through the FDIC's Secure Email portal or Enterprise File Exchange within FDICconnect.
FDIC, OCC, NCUA identify essential critical infrastructure workers during Covid-19
On March 26, the FDIC issued FIL-25-2020 stating that the financial services sector is a “critical infrastructure” during the Covid-19 pandemic pursuant to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s (CISA) March 19 guidance. The guidance is intended to help state, local, and industry partners identify critical infrastructure sectors and essential workers in order to ensure continuity of critical functions. The FIL advises company leadership to provide workers with documentation identifying them as critical infrastructure workers who need “to travel inside restricted areas in order to support critical infrastructure.”
On March 25, the OCC issued similar guidance pursuant to CISA’s guidance. Bulletin 2020-23 encourages essential critical infrastructure workers to maintain normal work schedules during the Covid-19 pandemic, and offers guidance for banks concerning workers who may need to move within and between restricted areas. Essential critical infrastructure workers include those who are needed to: (i) “process and maintain systems for processing financial transactions and services (e.g., payment, clearing and settlement; wholesale funding; insurance services; and capital markets activities)”; (ii) “provide consumer access to banking and lending services,” such as ATMs and armored cash carriers; and (iii) support financial institutions (e.g., staffing data and security operations centers). The workers also include key third party providers who deliver core services. The OCC advises banks to, among other things, update business continuity plans and provide documentation to workers detailing work-related travel.
The NCUA also sent a letter to member boards of directors, chief executive officers, chief information officers, and chief information security officers identifying essential critical infrastructure workers pursuant to CISA’s guidance. Updates to Covid-19 NCUA resources are available here.