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On May 5, 2020, the US federal banking regulators adopted an interim final rule to modify the liquidity coverage ratio (“LCR”) requirement to support banking organizations’ participation in the Federal Reserve Board’s Money Market Mutual Fund Liquidity Facility (“MMLF”) and the Paycheck Protection Program Liquidity Facility (“PPPLF”).[1] The modification is effective immediately, but the regulators have requested comment on whether the modification should be expanded to other types of COVID-19-related stimulus facilities.

Continue Reading US Banking Regulators Modify Liquidity Coverage Ratio for COVID-19 Stimulus Effects

On April 7, 2020, the US federal banking regulators issued a revised interagency statement (the “Revised Statement”) concerning agency treatment of loan modifications made in response to COVID-19.[1] The Revised Statement updates a prior statement that the regulators issued on March 22, 2020 to (i) address the enactment of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020[2] and (ii) provide greater clarity on whether a modified loan should be classified as a troubled debt restructuring (“TDR”) and the regulators’ enforcement posture with respect to loan modifications. See our Legal Update on the prior statement. A redline of the Revised Statement against the March 22 statement is included at Annex A.

Continue Reading Revised Guidance on Accounting for and Making Loan Modifications

The disruptions in economic conditions caused by COVID-19 are reaching the commercial paper and longer term debt capital markets. The Board of Governors of the US Federal Reserve System has already set into motion three separate facilities as part of its effort to facilitate credit and help alleviate collateral volatility that are expressly available to

On March 22, 2020, the United States Office of the Comptroller of the Currency (OCC) announced an interim final rule effective immediately to revise its short-term investment fund (STIF) rule for national banks acting in a fiduciary capacity.[1] The amendment allows the OCC to authorize banks to temporarily extend maturity limits of STIFs in order to address the market stress caused by the COVID-19 outbreak that is adversely affecting banks’ ability to operate in compliance with maturity limits identified in the STIF rule. While the amendment directly applies to national banks, other managers of STIF may be indirectly affected.[2]

In connection with the announcement of the interim final rule, the OCC announced an order, effecting the amendment to the STIF rule, to extend maturity limits for STIFs affected by COVID-19.[3] Pursuant to the order, a bank will be deemed to be in compliance with the STIF rule if:

Continue Reading US OCC Extends STIF Maturity Limits in Light of COVID-19 Market Conditions

As “stay-at-home” orders have rolled out across the United States, businesses, particularly financial services companies, have scoured definitional provisions to understand whether all forms of financial services companies have been designated as “essential businesses” and therefore exempt from closure requirements. What numerous financial services firms have found is that many categories of the financial services sector tend to be defined as essential businesses, but jurisdictions do not consistently define what is an essential financial services business. As a result, in some cases only banks and insurance companies have been specifically exempted from stay-at-home orders, whereas in other cases, jurisdictions apply and even expand upon the guidance that was issued by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) on March 19, 2020.

The CISA guidance was issued in an effort to provide communities and state governments with an initial list of what constitute “Essential Critical Infrastructure Workers” to ensure continuity of functions critical to public health and safety as well as economic and national security.[1] With respect to financial services, the guidance states that the following workers are considered essential:

Continue Reading OCC Issues Guidance to Protect Essential Workers

On March 21, 2020 the New York financial services community took note when Governor Cuomo issued an executive order which stated that banks subject to the jurisdiction of the New York Department of Financial Services (“DFS”) who failed to provide forbearance to businesses or consumers experiencing financial hardship would be deemed to be engaging in an “unsafe and unsound” practice.[1] The Governor’s order contemplated additional regulatory guidance from the DFS, and on March 24, the Superintendent of the DFS issued an emergency regulation (the “Emergency Regulation”) to “establish standards and procedures that regulated institutions must follow in their review of requests for relief and determinations to provide financial relief to those experiencing financial hardship, consistent with the purposes of Executive Order 202.9, this regulation and safe and sound practices of the regulated institutions.”[2]

Continue Reading New York DFS Issues Emergency Regulation to Provide Financial Relief to Residential Mortgage Borrowers

On March 18, 2020, the Board of Governors of the Federal Reserve System (“Federal Reserve”) established a facility that will provide liquidity to certain types of money market mutual funds (“MMFs”) by making secured loans to financial institutions that purchase certain assets from MMFs (the Money Market Mutual Fund Liquidity Facility, or “MMLF”).[1] The MMLF is intended to support prime, state and municipal MMFs that experience significant stress in the coming days in the event that investors seek to liquidate MMF shares into cash. This facility is similar to one operated by the Federal Reserve during the 2008 financial crisis but will be available for a wider range of assets. It also builds on efforts taken last week through the launch of the Commercial Paper Funding Facility to purchase unsecured and asset-backed commercial paper rated A1/P1 directly from eligible companies and the Primary Dealer Credit Facility to offer overnight and term-secured funding to primary dealers.[2]

We recommend that financial institutions review the procedures used in connection with the 2008 facility and that MMFs begin discussions with financial institutions regarding liquidity support through the MMLF.

Continue Reading US Federal Reserve Establishes Money Market Mutual Fund Liquidity Facility as Part of COVID-19 Response