UPDATED: Reg capital, LCR provisions to neutralize effects of participation in certain COVID-19 emergency facilities adopted as final

Three interim final rules in place since the spring to mitigate the effects on capital and the liquidity coverage ratio (LCR) in banks making use of certain Federal Reserve emergency funding facilities have been adopted by banking regulators in a single final rule that is set to take effect Dec. 28, according to a notice published in the Federal Register.

Specifically, the agencies – the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC) – are adopting as final the revisions to the regulatory capital rule and the liquidity coverage ratio (LCR) rule made under three interim final rules published in the Federal Register on March 23, April 13, and May 6. Adopted with no changes from the interim rules, the final rule permits banking organizations to continue to neutralize the regulatory capital effects of participating in the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF); and are required to continue to neutralize the LCR effects of participating in the MMLF and the PPPLF.

The final rule notice adds that Paycheck Protection Program loans will receive a zero percent risk weight under the agencies’ regulatory capital rules.

Final rule – Federal Register notice

RR: Rule will require banks to neutralize effects under LCR of participating in some COVID-19 emergency facilities (May 5, 2020)

RR: Rule puts Payroll Protection Program (PPP) loan facility to work ‘immediately’ (April 8, 2020)

RR: Banking agencies issue rule allowing financial institutions to use new money market liquidity facility (March 19, 2020)

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