Treatment of Certain Emergency Facilities in the Regulatory Capital Rule and the Liquidity Coverage Ratio Rule

Summary:

The FDIC, the Board of Governors of the Federal Reserve System (Federal Reserve), and the Office of the Comptroller of the Currency (the Agencies) are adopting as final the revisions to the regulatory capital rule and the liquidity coverage ratio (LCR) rule to facilitate the use of the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF).

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter (FIL) is applicable to all FDIC-supervised institutions that participate in the MMLF or PPPLF.

Highlights:

• Earlier this year, the Federal Reserve launched several lending facilities to support the economy in light of the coronavirus response, including the MMLF and PPPLF.
• The Agencies revised the regulatory capital rule and the LCR rule to facilitate the use of the MMLF and PPPLF through three interim final rules (IFRs), published in the Federal Register on March 23, April 13, and May 6, 2020. The Agencies are adopting these IFRs as final with no changes.
• Under the IFRs and this final rule, banking organizations may neutralize the regulatory capital effects of participating in the MMLF and the PPPLF. Banking organizations also are required to neutralize the LCR effects of participating in the MMLF and the PPPLF. In addition, Paycheck Protection Program loans receive a zero percent risk weight under the Agencies’ regulatory capital rules.

Distribution:

FDIC-Supervised Institutions

Suggested Routing:

Chief Executive Officer
Chief Financial Officer
Chief Risk Officer