On April 9, 2020, the federal bank regulatory agencies declared an interim final rule related to the Small Business Administration’s Paycheck Protection Program (PPP). The Coronavirus Aid, Relief, and Economic Security (CARES) Act established the PPP to provide loans to small businesses to keep workers on payroll during the pandemic.
To neutralize the regulatory capital effects of the Federal Reserve’s PPP facility, there will be no credit or market risk to loans given under the PPP facility. In accordance with additional agency rules and the CARES Act requirements, loans will have a zero percent risk weight.
Note: this is effective now, and comments will be accepted until April 13, 2020. For additional information, click here.