The federal insurer of bank deposits is jumping on the bandwagon of easing assessments – in its case, for deposit insurance – on banks that participate in the loan program to help businesses weather the financial impact of the coronavirus crisis.
In a final rule issued late Monday, the Federal Deposit Insurance Corp. (FDIC) said it is mitigating the deposit insurance assessment effects on insured depository institutions (IDIs) that are participating in the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The rule will also include IDIs participating in the lending facilities set up by the Federal Reserve to support the flow of credit, including the Paycheck Protection Program Liquidity Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF).
On Monday, the Office of the Comptroller of the Currency (OCC) issued an interim final rule that fees to fund the agency (assessments) due from the banks and thrifts Sept. 30 would be based on year-end 2019 call report data, rather than mid-year 2020 data. Typically, the agency uses the mid-year numbers to set the assessments. The agency said the change would result in lower assessments for most OCC-supervised banks.
Under its final rule, the FDIC said the effect of PPP lending in calculating an IDI’s deposit insurance assessment will be generally removed. For the PPPLF and MMLF, the FDIC said the rule provides an offset to an IDI’s total assessment amount for the increase in its assessment base attributable to participation in either or both of the programs.
The final rule takes effect upon publication in the Federal Register (which has not yet been scheduled). However, the FDIC said, the application date of the rule is April 1, and changes will be applied to assessments starting in the second quarter of 2020.
The FDIC also issued a financial institution letter (FIL-63-2020) on the final rule late Monday.
FDIC Issues Final Rule to Mitigate the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Liquidity Facility, and the Money Market Mutual Fund Liquidity Facility
FIL-63-2020: Final Rule Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Liquidity Facility, and the Money Market Mutual Fund Liquidity Facility