Banking agencies make final rules on appraisals, lending program impact on capital

Temporary rules established to counter the financial impact of the coronavirus crisis – on real estate appraisals and evaluations, and the impact on regulatory capital of participating in special lending facilities – were made final by federal banking regulators Tuesday.

Adopted as interim final rules by the agencies in March and April, the regulations deferred real estate-related appraisals and evaluations for up to 120 days after the closing of the transaction; and neutralized regulatory capital and liquidity effects for banks that participated in one of the Federal Reserve’s temporary lending facilities established to help certain sectors of the economy manage the financial impact of the pandemic.

The real estate appraisal rule was adopted as an interim final rule in April; the rule outlining the impact on capital of participation in lending facilities, in March.

In a release, the Fed noted that the appraisals final rule is “substantially similar” to the interim final rule from this spring. However, the final rule does clarify which loans are subject to the deferral. The final becomes effective when published in the Federal Register; it is set to expire Dec. 31.

The capital effects final rule – which applied to lending facilities that were announced in March, but then extended to additional facilities announced in April and May – is the same as the rules announced when those facilities were opened. The Fed said the effect of the final rule is to neutralize the regulatory capital and liquidity coverage ratio effects of participating in the Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility “because there is no credit or market risk in association with exposures pledged to these facilities.”

The capital rule becomes effective 60 days after it is published in the Federal Register; the Fed gave no indication of an expiration date for the rule.

Agencies issue two final rules

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