Overview
Action Items
- Confirm with your local Federal Reserve Bank whether your bank has existing access to the Federal Reserve’s Discount Window.
- Confirm with your local Federal Reserve Bank the identities of the officers that have authorization to act on behalf of your bank.
- Pass authorizing resolutions to access the Discount Window or to update your bank’s authorized officers.
- Review the PPPLF certification to ensure your bank meets the eligibility requirements.
On April 16, 2020, the Federal Reserve Board of Governors announced that its Paycheck Protection Program Liquidity Facility (PPPLF) is fully operational and available to provide liquidity to eligible financial institutions. The purpose of the PPPLF is to provide funding, in the form of non-recourse loans, to financial institutions that make loans under the Paycheck Protection Program (PPP).
Key Takeaways
Only PPP loans that are originated by the bank and guaranteed by the SBA are eligible collateral under the PPPLF. PPP loans pledged as collateral can be excluded from the calculation of the bank’s regulatory capital. The PPPLF does not abrogate the SBA’s ability to withhold any guaranty payments on a PPP loan. Accordingly, we urge banks to follow safe and sound lending practices when making PPP loans. Please contact us with any questions.
Differences From The Federal Reserve’s Main Discount Window
The primary credit program accepts a wide range of collateral—including PPP loans—however, the PPPLF only accepts PPP loans as collateral. In addition, primary credit loans are made with full recourse to the borrowing institution, while extensions of credit under the PPPLF are non-recourse. PPPLF extensions of credit are extended at a slightly higher rate than primary credit loans (35 basis points rather than 25 basis points), are for a longer term (PPPLF loans are generally for two years, while primary credit is available for up to 90 days), and the amount of the PPPLF extension of credit is determined based on the principal amount of the underlying PPP loan.
We Can Help You
We have been on the forefront of dealing with matters related to the PPP for our clients. Please contact us if you would like to discuss any of these issues or if we can otherwise be of assistance.
COVID-19 Resources
We recommend reviewing the following pandemic-related business and legal considerations we have been discussing with our clients: