UPDATED: Agencies take significant actions over course of three days in response to coronavirus impact

Reactions by federal financial institution regulators – particularly the Federal Reserve – in response to the spread of the coronavirus’s financial impact over the past several days have been significant. Here’s a rundown with a brief explanation of actions taken by each regulator, by day, starting Sunday:

Federal Reserve:

  • Sunday (March 15): 0% reserve requirement set (beginning March 26), with an eye toward helping depository institutions to support lending to households and businesses.
  • Sunday: Encouraged banks to use their capital and liquidity buffers as they lend to households and businesses who are affected by the coronavirus.
  • Sunday: Lowered the discount window’s primary credit rate by 150 basis points to 0.25%, effective March 16 (and announced that depository institutions may borrow from the discount window for periods as long as 90 days).
  • Sunday: Urged depository institutions to use intraday credit extended by Federal Reserve Banks, on both a collateralized and uncollateralized basis.
  • Monday (March 16): Issued joint statement with other federal banking agencies to encourage depository institution use of the discount window, noting that “the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for customers.” The discount window supports the smooth flow of credit to households and businesses, the agencies said.
  • Tuesday (March 17): Announced establishment of $10 billion commercial paper funding facility (CPFF); aim is to provide a liquidity backstop to U.S. issuers of commercial paper through a special-purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper directly from eligible companies. The SPV, the Fed said, will purchase commercial paper rated A1/P1 (as of March 17, 2020).
  • Tuesday: Joined with federal banking agencies to issue interim final rule making capital distribution restrictions more gradual for firms experiencing a decline in capital; goal is to help encourage lending to households and businesses.
  • UPDATE (March 18) Tuesday: Announced primary dealer credit facility (PDCF) aimed at facilitating the availability of credit to businesses and households; the facility is set to open Friday, March 20. The Fed said the PDCF will offer overnight and term funding with maturities up to 90 days. It will be in place for at least six months and may be extended as conditions warrant, the Fed said. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds, and a broad range of equity securities.

Federal Deposit Insurance Corp. (FDIC):

  • Monday: Suspended employee early retirement and separation programs announced March 5. The agency, earlier in the month, announced the separation and retirement to some 20% of staff as it worked to “reshape the agency’s workforce for the future and to enhance preparedness.” The agency announced no end date for the suspension of the early retirement/separation program.
  • Monday: Announced the agency’s Tuesday in-person board meeting – already closed to the public (but scheduled to be live streamed via the Internet) – is cancelled and said the board would would instead act by notation vote with results announced later. The board was considering a proposal related to parent companies of industrial banks and industrial loan companies.
  • Monday: Joined with federal banking agencies in joint statement encouraging use of discount window.
  • Tuesday: Joined with federal banking agencies in issuing interim final rule on capital distribution restrictions.

Office of the Comptroller of the Currency (OCC)

  • Monday: Joined with federal banking agencies in joint statement encouraging use of discount window.
  • Tuesday: Joined with federal banking agencies in issuing interim final rule on capital distribution restrictions.

National Credit Union Administration (NCUA)

  • Monday: Issued a “letter to credit unions” (20-CU-02) outlining strategies credit unions may consider when determining how to work with their members to address the impact and challenges of COVID-19, the coronavirus. The letter also detailed the agency’s plans for off-site examination procedures only. “A few exceptions for exigent circumstances will be made, ”the letter states. The agency added it will be evaluating that approach regularly and extending it as necessary.