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Federal Reserve Interim Rule Regarding Bank Capital Requirements
On April 9, 2020, the Federal Reserve Board issued an immediately effective, interim final rule updating banking regulations to neutralize the regulatory capital effects of participating in the Paycheck Protection Program Lending Facility (PPPL Facility). The goal of the new rule is to ease concerns held by many banks that participation in the PPPL Facility would impact their risk-based and leverage capital requirements by increasing regulatory capital requirements. A 30-day window for comments on the regulation opened yesterday.
In short, the regulation applies a 0% risk weight to the portion of exposure that is guaranteed by the government for purposes of determining risk-based capital requirements.
We encourage you to carefully review this new rule. We are happy to help with any questions or assist with providing comments to the Federal Reserve in response to the rule.
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The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal counsel for advice regarding specific situations.
