On May 12, 2020, the FDIC approved a notice of proposed rulemaking that would mitigate the deposit insurance assessment effects of banks’ participation in the Paycheck Protection Program (PPP) established by the U.S. Small Business Administration (SBA) and the Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMMLF) established by the Board of Governors of the Federal Reserve System.
The PPP, PPPLF and MMLF were put in place to provide financing to small businesses and liquidity to small business lenders and the broader credit markets, and to help stabilize the financial system in a time of significant economic disruption brought on by the COVID-19 pandemic. PPP loans are fully guaranteed by the SBA, and transactions made with the PPPLF and MMLF are conducted with the Federal Reserve on a non-recourse basis. The goal of the proposed rule is to ensure that banks will not be subject to significantly higher deposit insurance assessments for participating in these programs.
The proposed effective date for the rule is June 30, 2020, with an application date of April 1, 2020. This would ensure that the changes are applied to deposit insurance assessments beginning in the second quarter of 2020.
The full text of the proposed rule is available here.