OCC, noting Oct. 28 final rule on emergency funding facilities, rescinds prior guidance

A bulletin rescinding three previous ones to accommodate banking regulators’ recent rulemaking on the treatment of banks’ participation in three emergency funding facilities created to mitigate the negative impacts of COVID-19 was issued Tuesday by the Office of the Comptroller of the Currency (OCC).

The OCC, Federal Reserve, and Federal Deposit Insurance Corp. (FDIC) on Oct. 28 issued a final rule confirming three sets of revisions to the agencies’ regulatory capital and liquidity rules. The rule finalizes without changes the Money Market Liquidity Facility (MMLF) interim final rule issued on March 19; the Paycheck Protection Program (PPP) interim final rule issued on April 9; and the liquidity coverage ratio interim final rule issued on May 6. The final rule is effective for banks on Dec. 28.

The OCC, in Bulletin 2020-96, notes that the final rule supports banks’ originations of PPP loans under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and participation in the PPP Liquidity Facility (PPPLF) and MMLF by:

  • permitting a zero percent risk weight for PPP loans;
  • neutralizing the regulatory capital impact for participating in the PPP Liquidity Facility and Money Market Liquidity Facility; and
  • for banks subject to the liquidity rule, neutralizing the impact of participating in the Money Market Liquidity Facility or PPP Liquidity Facility.

The final rule, it said, applies to community banks if they participate in the MMLF or originate loans through the PPP.

The OCC said that Bulletin 2020-96 replaces and rescinds OCC Bulletin 2020-18, “Money Market Liquidity Facility: Interim Final Rule”; OCC Bulletin 2020-36, “Capital Treatment for Paycheck Protection Program: Interim Final Rule”; and OCC Bulletin 2020-48, “Liquidity Coverage Ratio: Interim Final Rule Addressing Treatment of Certain Emergency Facilities.”

Capital and Liquidity Treatment for Money Market Liquidity Facility and Paycheck Protection Program: Final Rule