Agencies Provide Relief for Banks Participating in PPP, Money Market Liquidity Facilities

To facilitate banks’ participation in the Paycheck Protection Program Liquidity Facility and the Money Market Mutual Fund Liquidity Facility, the federal banking agencies issued an interim final rule today that will allow institutions to neutralize the effects of their participation for purposes of the liquidity coverage ratio.

Under the existing liquidity coverage ratio rule, banks are required to hold a buffer of high-quality liquid assets to meet short-term liquidity needs. This action by the agencies effectively exempts MMLF or PPPLF funding from the LCR calculation. The rule takes effect immediately, and the agencies will accept comments for 30 days after publication in the Federal Register.