FDIC Issues Final Rule To Mitigate The Deposit Insurance Assessment Effect On Three Facilities
By Emmanuel Oluebube, Correspondent UK
The Federal Deposit Insurance Corporation (FDIC) has approved a final rule that mitigates the deposit insurance assessment effects of participating in the Paycheck Protection Programme (PPP) established by the US Small Business Administration and the Paycheck Protection Programme Liquidity Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF) 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 strain. At the same time, 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 FDIC’s action will ensure that banks will not be subject to significantly higher deposit insurance assessments for participating in these programmes.
Under the final rule, the FDIC will generally remove the effect of PPP lending in calculating an IDI’s deposit insurance assessment. Among other changes, the final rule provides an offset to an IDI’s total assessment amount for the increase in its assessment base attributable to participation in the PPP and MMLF.
The final rule will be effective immediately upon publication in the Federal Register, with an application date of April 1, 2020, and changes will be applied to assessments starting in the second quarter of 2020.
