ProBank Austin Recap of Recent Regulatory Issuances in Response to COVID-19

ProBank Austin has compiled the following recap of recent regulatory issuances in response to the impact of COVID-19 on the economy, financial institutions and their customers. As you will note, the guidance becomes increasingly more proactive as things got worse over the last two weeks. We encourage you to also check with your state banking associations on advice and ongoing updates.

 

 

Date

Agency

Topic

Recap

3/9/20

FDIC, OCC, CFPB, FRB, NCUA, CSBS

Customers Impacted by COVID-19

Agencies encourage financial institutions (FIs) to meet the needs of customers and members affected by COVID-19. Regulators to work with FIs on assistance as FIs work constructively with borrowers via prudent efforts that are consistent with safe & sound practices. Agencies will also work to schedule exams to minimize disruption and burden to FIs.

3/13/20

FDIC

FIL-17-2020 Regulatory Relief

FDIC encourages banks to work with customers and communities affected by COVID-19 in a prudent manner, especially those in industry sectors hardest hit. This is a unique and evolving situation posing temporary business disruption. FIs prudent efforts to modify loan terms will not be subject to regulatory criticism. FDIC will work to reduce regulatory burden and launches COVID-19 webpage. Statement includes examples of ways FIs may work with customers. Statement makes clear TDR standards still apply and should be assessed by FI. States if FI extends terms of loan for borrow that otherwise meet underwriting standards but is experiencing temporary liquidity shortage due to COVID-19-related economic conditions, this would NOT be a TDR. If a TDR is granted, it means the loan is impaired for accounting purposes but does not automatically result in an adverse classification if loan was performing prior to the TDR and continues performance under modified terms. Examiners are directed to exercise significant flexibility in classifying such loans.

3/13/20

OCC

Bulletin 2020-15 Regulatory Assistance

Almost identical to FDIC statement above. Also states modifications should be evaluated individually to determine if they are TDRs, but then states “banks may ease terms for new loans to affected borrowers, consistent with prudent banking.”

3/16/20

FDIC, OCC, FRB

Discount Window

These three federal regulatory agencies encourage banks to use the FRB’s “discount window” so that they can continue supporting households and businesses. The discount window provides short term loans to banks and plays an important role in supporting the liquidity and stability of the banking system, so banks don’t withdraw credit from communities during times of market stress. The discount window, then, is supporting the smooth flow of credit to households and businesses.

3/16/20

FDIC

Steps to support FIs and Customers

All FDIC employees now engaged in mandatory “telework” through at least March 30. Any onsite activities that are necessary will be conducted by minimal onsite teams. FDIC’s voluntary early retirement programs have been suspended.

3/16/20

FinCEN

BSA filings and Warns of Scams

FinCEN asks FIs to keep it and your primary regulator informed as soon as practicable if you have concerns about potential delays in ability to file required BSA reports. Also asks FIs to be Alert to SCAMS related to COVID-19 already being reported.

3/18/20

NCUA

FAQ Re: COVID- 19, NCUA, and CU Operations

Describes flexibility for federal credit unions (FCUs) on operations including closing facilities, impact on exam procedures, technology use for examiners, impact on filing quarterly Call Reports, NCUA’s Central Liquidity Facility (CLF), and scams FCUs should be aware of.

3/19/20

FDIC, OCC, FRB

Final Rule – Money Market Liquidity Facility

The COVID-19 disruption to financial markets has put increasing liquidity pressure on money market mutual funds straining to meet redemption requests from clients with immediate cash needs. The mutual funds may need to sell a significant number of assets to meet the redemption requests, which could further increase market pressures. The FRB with Treasury authorization has authorized the FRB of Boston to establish a Money Market Liquidity Facility. Under the facility, the FRB of Boston will extend non-recourse loans to eligible borrowers to purchase assets from the money market mutual funds. The assets purchased will serve as eligible collateral to the FRB of Boston. Eligible borrowers include certain banking organizations subject to the agencies’ capital rule. Eligible collateral includes US Treasuries, fully guaranteed agency securities, securities issued by government sponsored enterprises, and certain types of commercial paper. The non- recourse nature allows the effects of purchasing these assets to be excluded from a banking organization’s regulatory capital ratio calculations.

3/19/20

FDIC

FIL-18-2020 FAQ for FIs impacted by COVID-19

The FAQ’s further clarify the FDIC’s FIL-17-2020 issued 3/13/20. There are 14 Q&A’s ranging from modifications to reporting such as past due to dealing with customers wearing masks into the bank to property inspections prohibited by borrowers due to the COVID-19 pandemic. For BSA, contact your regulator if you expect reduced staffing to cause delays in processing reports related to BSA. This Issuance is a must read. Still refers you to accounting standards for determining if modifications are TDRs.

3/19/20

FDIC, OCC, FRB

FIL-19-2020 CRA Consideration for response to COVID-19

In light of the declaration of a national emergency, FIs will receive CRA consideration for community development activities and the FIs assistance to retail lending and banking services to low- and -moderate income individuals.

3/19/20

FDIC, OCC, FRB

FIL-20-2020 FIL-21-2020 Clarification on use of Capital and Liquidity Buffers; Revised Definition of Eligible Retained Earnings

The agencies encourage FIs to use their capital and liquidity buffers as they respond to the challenges presented by COVID-19. This is what the buffers are for. The FIL includes Q&As that respond to public inquiries from banking organizations regarding their use of these buffers. The agencies simultaneously issued an interim final rule on revisions to the definition of eligible retained earnings that impacts capital ratios and buffers. In particular, it is aimed at reducing the likelihood that a banking organization is suddenly subject to abrupt and restrictive capital distribution limits in a scenario of lower than expected capital levels. Such a disruption may be caused by COVID-19. S-Corps are allowed to distribute funds to meet tax liability from pass through of the bank’s earnings.

3/19/20

FDIC

FDIC Urges FASB to Delay Certain Accounting Rules

Requested exclusions to accounting rules include:

  • Excluding COVID-19 related modifications frombeing considered TDRs.
  • Permitting FIs currently subject to CECL an optionto postpone implementation of CECL under thecurrent economic environment.
  • Imposing a moratorium on the effective date for FIsnot currently required to implement CECL to allow them to focus on immediate business challenges relating to the impacts of the current pandemic.

3/22/20

FDIC, OCC, CFPB, FRB, NCUA, CSBS

Interagency Statement on Loan Modifications for Customers Affected by COVID-19

The federal regulatory agencies, and the Conference of State Bank Supervisors (CSBS) getting even stronger message out on their tolerance of loan modifications. The agencies have now confirmed with the staff of FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief ARE NOT TDRs. This includes REMs that are not already past due or in nonaccrual. Any modifications mandated by a federal or state government do not fall under the scope of ASC 310-40 definition of TDR.

FIs are not expected to designate loans with deferrals granted due to COVID-19 as past due solely because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal documents. ALSO, FIs should refer to regulatory reporting instructions to determine if a loan should be reported as nonaccrual,but such short term modifications as discussed in the statement should NOT be reported as NONACCRUAL. Future performance may warrant nonaccrual treatment. ALSO loans restructured under the terms of this interagency statement REMAIN ELIGIBLE for pledging at the FRB’s discount window based on the usual criteria.

In an effort to assist our clients, we will continue to keep you updated as additional issuances and press releases become available. Please refer to our website at www.probank.com for current updates related to COVID-19.

 

 

 

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