Agencies provide relief for banks participating in new liquidity facilities

To facilitate banks’ participation in the Paycheck Protection Program Liquidity Facility and the Money Market Mutual Fund Liquidity Facility, the federal banking agencies issued an interim final rule yesterday that will allow institutions to neutralize the effects of their participation for purposes of the liquidity coverage ratio.‌

Under the existing liquidity coverage ratio rule, banks are required to hold a buffer of high-quality liquid assets to meet short-term liquidity needs. This action by the agencies effectively exempts MMLF or PPPLF funding from the LCR calculation. The rule takes effect immediately, and the agencies will accept comments for 30 days after publication in the Federal Register.
IRS releases coronavirus-related FAQs affecting retirement plans and IRAs
The IRS on Monday released a set of frequently asked questions on Section 2202 of the CARES Act, which allows for penalty-free coronavirus-related distributions up to $100,000 from eligible retirement plans (including 401(k) and 403(b) plans and IRAs) to qualified individuals.

The FAQs address how these distributions should be reported by retirement plan and IRA custodians and trustees. They also indicate that the IRS will be issuing more detailed guidance soon, and that it will follow the same principles as related guidance issued following Hurricane Katrina .
SBA offers clarity for PPP borrowers attempting to rehire employees
The Small Business Administration and the Treasury Department confirmed that Paycheck Protection Program borrowers who attempt to rehire employees that were laid off will not have their loan forgiveness amounts reduced if those employees decline the offer to return to work.
In updates to the PPP FAQs late Sunday night, SBA and Treasury said they would issue an interim final rule in the coming days codifying that a borrower must have documented that they made a good faith, written offer of rehire to the employee for the same wages and number of hours. Borrowers must also document the employee’s rejection of the offer.
In addition, the updated FAQs provide clarification about the treatment of nonprofit hospitals under the CARES Act. A nonprofit hospital may qualify for PPP funding if it “reasonably determines” and maintains documentation that it meets the criteria of a 501(c)(3) under the Internal Revenue Code and is therefore tax exempt under section 501(a), SBA and Treasury noted. They added that these entities should also review all other applicable eligibility criteria.
The FAQs also provide additional guidance for seasonal employers making borrower certifications to obtain PPP funding.  Read the updated FAQs .
SBA: PPP round two lending tops $181B

As of 5 p.m. last night, a total of 2.38 million Paycheck Protection Program loans had been made in the second round of funding for a total of $181.2 billion—about 57% of the round two funds available—the Small Business Administration said.

Of that total, approximately 53% was made by lenders with over $50 billion in assets, 15% by lenders with $10-50 billion in assets and 32% by lenders with under $10 billion. The average loan size for round two was $76,179, and across both rounds, the average loan size dropped to $129,294.

Meanwhile, SBA yesterday said it will grant a seven-day extension to the safe harbor for firms that have access to other sources of capital to repay PPP loans. Borrowers that applied for a PPP loan prior to April 24, 2020, and that repay the loan in full by May 14, 2020, will be deemed by SBA to have made the required certification of economic need in good faith.

‌In updates to its FAQ document, SBA noted that the extension will be automatic and will be implemented through a revision to the interim final rule that provided the safe harbor. SBA also said that it expects to issue additional guidance on how it will review the borrower certification will be issued prior to May 14 .
The White House has announced an extension through May 14 for companies to reimburse the Small Business Administration with funds wrongly drawn from the Paycheck Protection Program.

The move comes after Treasury Secretary Steven Mnuchin clarified the support was not aimed at larger corporations and warned the SBA would probe loans above $2 million for criminal liability.
The coronavirus pandemic led to tougher lending standards by banks in the first quarter, according to a survey of 89 banks by the Federal Reserve. Demand was weaker for credit cards, automobile loans and other consumer loan products, the survey found.
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