While not mandated, banks urged to document PPP loan decisions (with CRA credit possible)

Banks making loans under the Paycheck Protection Program (PPP) are urged to “prudently document” their decisions for the loans – if nothing else, to help the banks qualify for credit under anti-redlining rules, the regulator of national banks said Tuesday.

In a bulletin (No. 2020-45, which replaces another, No. 2020-44, which was rescinded), the Office of the Comptroller of the Currency (OCC) stated that, while it is not requiring banks to obtain or maintain “information beyond what exists in the ordinary course of business,” it is urging them to document its actions. The OCC noted that loans made under the Small Business Administration’s PPP program “are an important part of the federal COVID-19 response program for small business and may qualify for credit under the Community Reinvestment Act (CRA).”

The OCC also said it encourages banks to “identify and track the PPP loans made to small business borrowers that have annual revenues of $1 million or less and are located in low- to moderate-income (LMI) areas.”

More specifically, the OCC bulletin advised banks that, when working with all applicants for the loans, “banks are encouraged to collect and track information provided during the application process regarding borrowers’ annual revenue, and for loans made in LMI census tracts, distressed areas, and underserved areas, and that benefit LMI individuals, families, and communities.

The regulator stated that maintaining and monitoring that information “is a prudent banking practice consistent with the principles of safety and soundness and fair access and fair treatment of borrowers. “Prudent practices may also include documenting implementation decisions—such as the bank’s business justifications and any alternatives considered—when setting eligibility criteria, establishing processes for considering applications, and approving or denying PPP applications,” the agency stated. “Relevant business considerations may include estimates of resources needed to implement and offer the SBA PPP, current available resources (including staff resources), and the ability to access needed information about an applicant in a timely way, among other factors.”

The OCC said banks should also identify and track PPP loan volumes, which it stated would enhance overall credit risk management while enabling the bank to demonstrate “the full spectrum of businesses served, including small businesses and those in LMI areas.”

“When exercising supervisory and enforcement responsibilities in this area, the OCC will take into account the unique circumstances resulting from the national emergency and good faith efforts to comply with applicable legal requirements,” the agency stated.

OCC Bulletin 2020-45: Credit Administration: Documentation of SBA Paycheck Protection Program Loans

Rescinded: OCC Bulletin 2020-44