Banks participating in the Paycheck Protection Program could avoid increases in deposit insurance rates that would otherwise see effects from borrowing for the program.
The Federal Deposit Insurance Corp., which guarantees customers’ bank deposits up to $250,000, has proposed a rule to mitigate the deposit insurance assessment effects of participating in the Paycheck Protection Program as well as the Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF) established by the Board of Governors of the Federal Reserve System.
The rule released Tuesday would:
- Remove the effect of participation in the PPP and PPPLF on various risk measures used to calculate an insured depository institutions (IDIs) assessment rate,
- Remove the effect of participation in the PPPLF and MMLF programs on certain adjustments to an IDI’s assessment rate,
- Provide an offset to an IDI’s assessment for the increase to its assessment base attributable to participation in the MMLF and PPPLF, and
- Remove the effect of participation in the PPPLF and MMLF programs when classifying IDIs as small, large or highly complex for assessment purposes.
The proposed rule would be effective by June 30 and apply to assessments starting in the second quarter of 2020.
Also on Tuesday, the Federal Reserve said it would publicly disclose information each month about lenders using the PPPLF to fund PPP loans for small businesses. The public information will include the institution’s name, amounts borrowed, interest rate charged and the value of pledged collateral. The PPPLF’s overall costs, revenues and fees will also be disclosed.
The disclosures will also be made for the Term Asset-Backed Securities Loan Facility (TALF), which was announced on March 23 as part of an initiative to support the flow of credit to U.S. consumers and businesses.
