A recent proposal by the FDIC to provide certainty to banks participating in the Paycheck Protection program and its associated lending facility falls short of completely offsetting the effect of such participation for any institution, the American Bankers Association and the Bank Policy Institute said in a comment letter yesterday. The FDIC‘s proposal was intended to ensure that institutions participating in the PPP and PPPLF, as well as the Money Market Mutual Fund Liquidity Facility, would not be subject to increased deposit insurance assessments as a result of their participation.
To more effectively limit the impact of PPP loans on deposit assessments, ABA and BPI urged the FDIC to recognize the entire quarter-end balance of all PPP loans, not just those pledged to the PPPLF; factor the quarter-end outstanding balance of all PPP loans into the leverage ratio used in the assessment formulas; allow that PPP loans not be considered as potential “higher risk assets”; post revised assessments calculators as soon as possible; and include the new Call Report items under “Memoranda” on Schedule RC-C.
The groups did offer support for several of the proposed rule’s provisions, including changes to the loan mix index in the formula for assessments for “small” banks; changes to several ratios and measures included in the assessment formulas for “large” and “highly complex” banks; and changes to unsecured debt, depository institution debt and brokered deposit adjustments for all banks.
