FDIC, OCC Trim Effects of COVID-Related Loan Growth on Assessments

Noting that many banks grew loans substantially in response to credit needs during the coronavirus pandemic, the OCC and FDIC today issued rules to ensure that banks do not pay increased assessments as a result of their increased lending amid the pandemic. Under an interim final rule, OCC-supervised banks may calculate their Sept. 30 assessment payments using either their assets on the Dec. 31, 2019, Call Report or their assets on the June 30, 2020, Call Report—whichever is lesser.

“Banks have played an important role in the national response to COVID-19,” said Acting Comptroller of the Currency Brian Brooks said. “As a result, many banks took on significant volumes of additional assets while providing relief to their customers as part of these federal programs. Banks should not be penalized by these efforts to support our national recovery.”

Meanwhile, the FDIC approved a final rule mitigating the deposit insurance effects of participating in key COVID-19 response efforts, including the Paycheck Protection Program, the PPP Liquidity Facility and the Money Market Mutual Fund Liquidity Facility. The rule removes the effect of PPP loans in calculating a bank’s deposit insurance assessment and provides an offset to a bank’s total assessment amount for the increase in its assessment base resulting from its participation in the PPP, PPPLF and MMLF. The rule is effective immediately, applies retroactively to April 1 and applies to assessments starting in the second quarter of 2020.

“Due to the complexities of the FDIC’s assessment formulas and a desire to minimize added reporting burden, fully neutralizing the impact of PPP lending on assessments is not possible. Mitigating the impact requires the FDIC to make certain assumptions, including which loan categories PPP loans fall under and how they are funded,” said FDIC Chairman Jelena McWilliams. She added that the final rule “substantially mitigates the impact of PPP lending on banks’ assessments. . . . Banks have served as a source of strength throughout this recent period of economic turmoil, and the FDIC continues to fine-tune its rules and policies to enable them to do so.”

This article has been updated.