Financial Institutions and Banking

Bank Wire

CAA provides COVID-19 relief for banks

The Consolidated Appropriations Act (CAA), passed in late December 2020, contains a variety of COVID-19 relief provisions, including a second round of stimulus payments to individuals, enhanced unemployment benefits, and expansion of the Paycheck Protection Program (PPP). The act also offers some bank-specific relief. For example, it:

  • Delays the compliance deadline for the current expected credit loss (CECL) accounting standard until the earlier of 1) the first day of the bank’s fiscal year that begins after termination of the COVID-19 public health emergency, or 2) January 1, 2022; and
  • Extends the time during which banks may elect to temporarily suspend troubled debt restructuring (TDR) accounting for certain COVID-19-related loan modifications until the earlier of 1) 60 days after the public health emergency ends, or 2) January 1, 2022.

It also establishes a $9 billion fund to provide low-cost, long-term capital investments to qualifying banks. To qualify, they need to be community development financial institutions or minority depository institutions.

SBA guidance on PPP loans

After the CAA authorized “second-draw” forgivable PPP loans, the Small Business Administration (SBA) and Treasury Department issued rules for these loans. Among other things, the rules clarify that: the SBA will guarantee 100% of second-draw loans; no collateral or personal guarantees will be required; the interest rate will be 1%, calculated on a noncompounding, nonadjustable basis; maturity will be five years; and all loans will be processed by lenders under delegated authority.

It may rely on borrower certifications to determine the borrower’s eligibility and use of loan proceeds. (Note: The borrower must substantiate compliance with eligibility requirements by the time they submit a forgiveness application.)

Simplified PPP forgiveness application

The CAA simplifies the forgiveness application for businesses that borrow less than $150,000. These borrowers will submit a one-page application that includes the total loan value, the estimated portion of the loan spent on payroll, and the number of employees retained as a result.

Fintech partnership guide

Community banks are increasingly partnering with “fintech” companies to offer their customers access to the latest banking technology tools. But these partnerships are fraught with practical and regulatory compliance challenges. Recently, a member of the Federal Reserve Board announced that the Fed would work with other banking agencies to develop a fintech vendor due diligence guide for community banks as well as enhanced interagency guidance for third-party risk management. This guidance is expected to “eliminate the need for community banks to navigate multiple supervisory guidance documents on the same issue” and “enhance clarity on supervisory expectations for community bank partnerships with fintech companies.”




Leave a Reply