February 17, 2021
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SBA issues guidance on new loan program; PPP hold codes & error messages
 
The SBA issued two new notices on its lending programs.
 
SBA Procedural Notice 5000-20093: Provides guidance on establishing maturities of new 7(a) loans eligible to receive six months of payments under Section 1112 of the CARES Act. Lenders may not artificially shorten loan maturities so that SBA pays all or substantially all of the loan, which would result in the SBA not guaranteeing the loan.
 
SBA Information Notice 5000-20094: Provides guidance and instructions for registering on SAM.gov and reporting the unique identifier to SBA, which is required for recipients of federal loans, loan guarantees, and other financial assistance.

The Agency also released a new Procedural Notice on revised PPP platform procedures for hold codes and compliance check error messages.
 
Background: The SBA is conducting front-end compliance checks on lenders' loan guaranty applications using a modified version of the automated screening tool and information from the Treasury Department's "Do Not Pay" lists. When an issue is identified, the compliance checks generate an error message.

The Procedural Notice provides lenders with methods for resolving hold codes on first-draw PPP loans and compliance check error messages on first- and second-draw loans.

Additional information and resources are available on the SBA and Treasury PPP pages, ICBA's PPP and EIP News page, ABC's matrix of PPP updates in the stimulus law, and ICBA's summary of the stimulus package's community banking provisions.
 Source: SBA; Treasury; ICBA; ACB
Grassroots outreach on PPP reforms urged

ICBA is calling on community bankers to urge their members of Congress to make needed improvements to the Paycheck Protection Program.
 
The custom grassroots alert on ICBA's Be Heard action center calls for relief from restrictions related to first-draw loan increases, second-draw eligibility, self-employed farmers and ranchers, and live-action venues.
Source: ICBA
Summary on new BSA/AML law

ICBA issued a summary on the defense spending law enacted at the beginning of the year that includes BSA/AML reforms.
 
Among its reforms, the National Defense Authorization Act establishes a Financial Crimes Enforcement Network database of company "beneficial ownership" information for use by law enforcement.
 
ICBA's summary details the provisions of the law, including the beneficial ownership reforms, a required Treasury review of SAR and CTR standards, and more.
Source: ICBA
Fed extends rule allowing PPP loans to directors

The Federal Reserve Board again extended its rule allowing certain bank directors and shareholders to apply to their banks for Paycheck Protection Program loans for their small businesses.
 
The SBA clarified last year that lenders may make PPP loans to businesses owned by their directors and certain shareholders. The rule extension is effective immediately and applies to PPP loans made through March 31, consistent with SBA's rules and restrictions.

Source: Federal Reserve
Cannabis banking draws more interest

For years, only a small number of banks and credit unions have been willing to offer their services to the cannabis industry, giving its cash-laden businesses a place to safely deposit their money without fear of a robbery.

But the number of institutions willing to do so appears to be growing. And now, those early adopters are moving beyond deposit services and slowly starting to offer loans to the cannabis industry — which has struggled to get access to credit even as more states legalize the drug.

Those efforts could get a boost from President Joe Biden's administration and the Democratic majority in Congress. Even if policymakers opt against legalizing the drug at the federal level, analysts say the banking industry may get the green light to offer services to cannabis companies in states where the drug is legal.

The interest is spreading beyond just smaller financial institutions. Wayne, N.J.-based Valley National Bancorp, a regional bank with more than $40 billion in assets, has launched a pilot program to accept deposits from a few larger corporate customers. It sees an opportunity to help multi-state operators manage their operations in compliance with different states' regulations by using software that verifies the legality of each transaction ahead of time.

Source: S&P Global Market Intelligence
Self-assessment tool for LIBOR transition

The OCC released a self-assessment tool for banks to evaluate their preparedness for the expected cessation of LIBOR. The tool can help banks assess their transition plan as well as related oversight and reporting.
 
Regulators last year issued a joint statement encouraging banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and no later than Dec. 31, 2021, to facilitate the transition away from LIBOR.

Source: OCC
Public banking poses risks

The growing push for public banks puts consumers and taxpayers at risk, according to a National Taxpayers Union op-ed. In the Daily Caller, NTU's Andrew Wilford writes that public banks would encourage risky lending while putting taxpayer funds on the line.
 
ICBA opposes the formation of any new public banks—whether owned by states, municipalities, or the U.S. Postal Service—which would create undue taxpayer risk and compete with community banks, diverting deposits from local communities.
 
Postal banking proposals are expected be introduced and debated in the 117th Congress.
Source: Reuters
!! BSA Event of the Year !!

ACB and Bankers Assurance
2021 Bank Secrecy and Anti-Money Laundering
Virtual Conference - March 11, 2021