March 30, 2020 

URGENT: Most Recent Treasury/SBA Process Update

During a conference call today with the American Bankers Association and state bankers associations, MBA learned that the Treasury Department would be issuing guidance on the CARES Act either this evening or in the morning. The first disclosure of that guidance will come in the Federal Register. Once it is published, MBA will notify its members. Other items of note follow.

  • The Treasury Department is working with Amazon Web Services to create an electronic vendor system to facilitate loan documents and requests from the SBA to the Treasury Department. This system should be operational this week … hopefully in a few days.
  • Existing SBA 7a lenders will be the first to receive applications and process loans. It is anticipated that funding for these loans would begin Friday.
  • Non-SBA 7a lenders will receive guidance later this week. No specific date was provided. 
  • ABA is hosting a webinar at 1 p.m. Tuesday, March 31, for ABA members and nonmembers to discuss the guidance from the Treasury Department.
  • MBA also is hosting a SBA call at 9 a.m. Wednesday, April 1, with the Tom Salisbury, Region 7 SBA Administrator. You may register online or call 573-636-8151 by 3 p.m. Tuesday, March 31.

Everything is very fluid right now, so understand that things could change before the guidance comes out.

During MBA’s Friday call with Congressman Blaine Luetkemeyer and Congressman Ann Wagner, it was asked if the owner of five U.S. Cellular stores would qualify for assistance under the Paycheck Protection Act since SBA affiliation rules would typically forbid it . We have learned that “Affiliation standards are waived in the bill for businesses with fewer than 500 employees with an assigned NAICS code beginning with 72, or any business that is a franchise under existing SBA franchise rules. So, this particular customer should be able to apply for PPP if they meet either of those criteria.”

In addition, there is confusion if a bank qualifies under PPP.  We will have to wait for guidance.

ABA Webinar Addresses What Banks Need To Know About CARES Act

The CARES Act provides an unprecedented amount of relief to consumers and businesses hit by the economic repercussions of the coronavirus pandemic. The legislation anticipates that banks of all sizes will serve as the delivery mechanism for much of that relief. Key provisions affecting banks and their ability to work with customers include the following.
  • a 100% guarantee of loans made for a new SBA 7(a) Payment Protection Program
  • temporary relief from troubled debt restructuring categorizations and an option to delay the implementation of the current expected credit loss standard
  • a lower community bank leverage ratio of 8%
  • $500 billion for the U.S. Treasury’s Exchange Stabilization fund to provide sufficiently collateralized loans, loan guarantees and other investments to eligible entities
  • authority for the FDIC to establish a temporary program to guarantee bank debt
  • forbearance policies for loans backed by federal government agencies or GSEs
The American Bankers Association is hosting a webinar at 1 p.m. Tuesday, March 31, to discuss what banks need to know about the CARES Act. This webinar is open to ABA-member banks and nonmember banks. Nonmember banks will need to create a profile on aba.com to access the webinar registration.

CISA Expands Roster Of ‘Critical Infrastructure’ Jobs

The Cybersecurity and Infrastructure Security Agency updated guidance, broadening the list of jobs deemed to be “essential critical infrastructure workers.” This guidance is intended to aid state and local governments as they make determinations about the activities that should continue normal operations during the coronavirus pandemic.
Functions newly included in the revised guidance are the following.
  • verifying and recording financial transactions
  • commercial lending and banking services
  • maintenance of orderly market operations
  • nonbank financial services and money transmitters
  • financial services call centers
  • production and distribution of debit and credit cards
  • electronic point-of-sale support for essential businesses

These functions join those included in the original guidance.

  • workers who are needed to process and maintain systems for processing financial transactions and services
  • workers who are needed to provide consumer access to banking and lending services, including ATMs, and to move currency and payments
  • workers who support financial operations such as those staffing data and security operations centers

Although the CISA list is advisory in nature and is not considered to be a federal directive or standard in and of itself, many localities implementing stay-at-home or shelter-in-place orders to combat the spread of COVID-19 rely on it to determine whether individuals may go to work. The Treasury Department has issued documentation that essential financial services employees can carry to demonstrate that they must go to work. The documentation should be accompanied by the CISA guidance and a bank ID or official bank document confirming their essential status.

Trump Signs Coronavirus Aid Bill With Numerous ABA-Advocated Provisions

On Friday, President Trump signed into law the CARES Act, a $2 trillion stimulus package to provide relief to American consumers and businesses struggling as a result of the coronavirus pandemic. The law provides banks with additional tools to help their customers and communities, and the nation’s economy, through the crisis.
 
The law contains several provisions ABA actively advocated for in conversations with policymakers in recent days. Among them are significant enhancements to the Small Business Administration’s lending programs that include increasing to 100% the government guarantee of loans made for the 7(a) loan program’s new Paycheck Protection Program and waiving certain requirements for SBA Economic Injury Disaster Loans made in response to the COVID-19 emergency.
 
Other ABA-backed provisions include a temporary relief from troubled debt restructuring designations, an optional CECL delay, an 8% community bank leverage ratio and more. ABA has prepared an executive summary of the CARES Act for its members.

To help small businesses and sole proprietors understand their emergency and payroll protection loan options under the new law, the U.S. Chamber of Commerce released a guide that banks can share with their customers.

Regulatory Agencies Adjust The Calculations For Credit Concentration

The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve and the Office of the Comptroller of the Currency are jointly adjusting their calculation for credit concentration ratios used in the supervisory process. The adjustment is in response to changes in the capital information available after the implementation of the Community Bank Leverage Ratio rule. Effective March 31, for supervisory purposes, examiners will calculate credit concentration ratios using tier 1 capital plus the appropriate allowance for loan and lease losses or the allowance for credit losses attributed to loans and leases (as applicable) for the denominator.

Free ABA Webinar Explores Business Continuity

The American Bankers Association is hosting a webinar focusing on business continuity with core providers at noon Wednesday, April 1. The four major core providers will speak on business continuity and digital banking. Joined by two community bank executives, representatives from FIS, Fiserv, Finastra and Jack Henry will discuss how they are supporting banks’ business continuity and resilience efforts, as well as strategies banks can use to run a successful digital bank during this time when consumers cannot rely as much on in-person banking services. This webinar is open to ABA-member banks and nonmember banks. Nonmember banks will need to create a profile on aba.com to access the webinar registration.

Agencies Approve Delay Of CECL Capital Phase-In, Early Adoption Of SA-CCR 

The federal banking agencies announced two actions intended to help banks ensure the continued flow of credit to households and businesses during the coronavirus pandemic. First, the agencies issued an interim final rule giving banks that are implementing the current expected credit loss standard this year the option to delay for two years the phase-in of the standard’s regulatory capital effects. This extension comes in addition to the three-year phase-in period that was previously established. Institutions also may also choose to follow the capital transition rule issued by the agencies in February 2019, the agencies said.
 
In addition, the agencies said they would allow early adoption of the standardized approach for measuring counterparty credit risk. Institutions may adopt SA-CCR for the reporting period ending March 31.

Implementation Of Basel IV Standards Delayed

The Basel Committee on Banking Supervision announced it will delay the implementation of outstanding capital standards, commonly referred to as “Basel IV,” to allow banks to focus their resources on navigating the coronavirus pandemic. The standards, originally set to be implemented on Jan. 1, 2022, will now have an implementation date of Jan. 1, 2023. The committee also extended the accompanying transitional arrangement for the output floor to Jan. 1, 2028.
 
Also delayed until Jan. 1, 2023, are the implementation date of the revised market risk framework finalized in January 2019 and the implementation date of the Pillar 3 disclosure requirements finalized in December 2018.

FDIC To Continue Off-Site Exams Through April 12

As part of the agency’s ongoing response to the spread of coronavirus in the U.S., the Federal Deposit Insurance Corporation said it would continue conducting bank exams off-site until at least April 12 and would continue to evaluate the necessity of continuing off-site work as that date approaches. The agency also encouraged banks facing operational or staffing challenges to communicate with their examiners to coordinate the timing of responses to supervisory requests.

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