Proposal would limit impact on deposit insurance premiums for participation in special financial facilities related to COVID-19 impact

Higher deposit insurance premiums will not be triggered by participation in some of the financial tools meant to help banks deal with the impact of the coronavirus crisis, under a proposal issued Tuesday by the federal insurer of bank deposits.

The Federal Deposit Insurance Corp. (FDIC) issued a notice of proposed rulemaking (NPR) — with a proposed effective date of June 30, but an application date of April 1 – which the agency said is designed to “mitigate the deposit insurance assessment effects” of participation in the financial tools, including: the Small Business Administration’s (SBA) Paycheck Protection Program (PPP); and the Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF) established by the Federal Reserve.

The application date of April 1 and effective date of June 30, the agency said, would ensure that the changes are applied to assessments beginning in the second quarter of this year. The agency said that time frame would also provide certainty to IDIs (insured depository institutions) about the assessment effects of these programs.

“The FDIC’s action today will ensure that banks will not be subject to significantly higher deposit insurance assessments for participating in these programs,” the FDIC said in a release.

There is a very short comment period associated with the NPR: seven days following publication in the Federal Register.

Notice of Proposed Rulemaking Re: Assessments, Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility