# FDIC FIL-56-2020: Proposed Rulemaking to Mitigate the Deposit Insurance Assessment Effects of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL20056

## Section

- **Citation:** FDIC FIL-56-2020
- **Heading:** Proposed Rulemaking to Mitigate the Deposit Insurance Assessment Effects of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / Proposed Rulemaking to Mitigate the Deposit Insurance Assessment Effects of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility

## Text

30649
Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
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DOE considers public participation to
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actively encourages the participation
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comment period in each stage of the
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process
n to
be a very important part of the process
for developing energy conservations
standards for consumer products. DOE
actively encourages the participation
and interaction of the public during the
comment period in each stage of the
rulemaking process. Interactions with
and between members of the public
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ee.doe.gov.
Signing Authority
This document of the Department of
Energy was signed on April 2, 2020, by
Alexander N. Fitzsimmons, Deputy
Assistant Secretary for Energy
Efficiency, Energy Efficiency and
Renewable Energy, pursuant to
delegated authority from the Secretary
of Energy. That document with the
original signature and date is
maintained by DOE. For administrative
purposes only, and in compliance with
requirements of the Office of the
Federal Register, the undersigned DOE
Federal Register Liaison Officer has
been authorized to sign and submit the
document in electronic format for
publication, as an official document of
the Department of Energy. This
administrative process in no way alters
the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on May 6, 2020.
Treena V. Garrett,
Federal Register Liaison Officer, U.S.
Department of Energy.
[FR Doc. 2020–09988 Filed 5–19–20; 8:45 am]
BILLING CODE 6450–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AF53
Assessments, Mitigating the Deposit
Insurance Assessment Effect of
Participation in the Paycheck
Protection Program (PPP), the PPP
Lending Facility, and the Money Market
Mutual Fund Liquidity Facility
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
m]
BILLING CODE 6450–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AF53
Assessments, Mitigating the Deposit
Insurance Assessment Effect of
Participation in the Paycheck
Protection Program (PPP), the PPP
Lending Facility, and the Money Market
Mutual Fund Liquidity Facility
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking.
SUMMARY: The Federal Deposit
Insurance Corporation is seeking
comment on a proposed rule that would
mitigate the deposit insurance
assessment effects of participating in the
Paycheck Protection Program (PPP)
established by the Small Business
Administration (SBA), and the Paycheck
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Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
1 See 12 U.S.C. 1817, 1819 (Tenth).
2 12 U.S.C. 343(3).
3 Public Law 116–136 (Mar. 27, 2020).
4 Under the PPP, eligible borrowers generally
include businesses with fewer than 500 employees
or that are otherwise considered by the SBA to be
small, including individuals operating sole
proprietorships or acting as independent
contractors, certain franchisees, nonprofit
corporations, veterans’ organizations, and Tribal
businesses. The loan amount under the PPP would
be limited to the lesser of $10 million and 250
percent of a borrower’s average monthly payroll
costs. For more information on the Paycheck
Protection Program, see https://www.sba.gov/
funding-programs/loans/coronavirus-relief-options/
paycheck-protection-program-ppp.
Protection Program Lending Facility
(PPPLF) and Money Market Mutual
Fund Liquidity Facility (MMLF)
established by the Board of Governors of
the Federal Reserve System
50
percent of a borrower’s average monthly payroll
costs. For more information on the Paycheck
Protection Program, see https://www.sba.gov/
funding-programs/loans/coronavirus-relief-options/
paycheck-protection-program-ppp.
Protection Program Lending Facility
(PPPLF) and Money Market Mutual
Fund Liquidity Facility (MMLF)
established by the Board of Governors of
the Federal Reserve System. The
proposed changes would remove the
effect of participation in the PPP and
PPPLF on various risk measures used to
calculate an insured depository
institution’s assessment rate, remove the
effect of participation in the PPPLF and
MMLF programs on certain adjustments
to an IDI’s assessment rate, provide an
offset to an insured depository
institution’s assessment for the increase
to its assessment base attributable to
participation in the MMLF and PPPLF,
and remove the effect of participation in
the PPPLF and MMLF programs when
classifying insured depository
institutions as small, large, or highly
complex for assessment purposes.
DATES: Comments must be received no
later than May 27, 2020.
ADDRESSES: You may submit comments
on the proposed rule, identified by RIN
3064–AF53, using any of the following
methods:
• Agency website: https://
www.fdic.gov/regulations/laws/federal.
Follow the instructions for submitting
comments on the agency website.
• Email: comments@fdic.gov. Include
RIN 3064–AF53 on the subject line of
the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
Include RIN 3064–AF53 in the subject
line of the letter.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street NW,
building (located on F Street) on
business days between 7 a.m. and 5 p.m
.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
Include RIN 3064–AF53 in the subject
line of the letter.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street NW,
building (located on F Street) on
business days between 7 a.m. and 5 p.m.
• Public Inspection: All comments
received, including any personal
information provided, will be posted
generally without change to https://
www.fdic.gov/regulations/laws/federal.
FOR FURTHER INFORMATION CONTACT:
Michael Spencer, Associate Director,
202–898–7041, michspencer@fdic.gov;
Ashley Mihalik, Chief, Banking and
Regulatory Policy, 202–898–3793,
amihalik@fdic.gov; Nefretete Smith,
Counsel, 202–898–6851, nefsmith@
fdic.gov; Samuel Lutz, Counsel, salutz@
fdic.gov, 202–898–3773.
SUPPLEMENTARY INFORMATION:
I. Summary
Pursuant to its authority under the
Federal Deposit Insurance Act (FDI Act),
the FDIC is issuing this notice of
proposed rulemaking to mitigate the
effects of an insured depository
institution’s participation in the PPP,
MMLF, and PPPLF programs on its
deposit insurance assessments.1 Absent
a change to the assessment rules, an IDI
that participates in the PPP, PPPLF, or
MMLF programs could be subject to
increased deposit insurance
assessments. To remove the effect of
these programs on the risk measures
used to determine the deposit insurance
assessment rate for each insured
depository institution (IDI), the FDIC is
proposing to exclude PPP loans, which
include loans pledged to the PPPLF,
from an institution’s loan portfolio;
exclude loans pledged to the PPPLF
from an institution’s total assets; and
exclude amounts borrowed from the
Federal Reserve Banks under the PPPLF
from an institution’s liabilities
the deposit insurance
assessment rate for each insured
depository institution (IDI), the FDIC is
proposing to exclude PPP loans, which
include loans pledged to the PPPLF,
from an institution’s loan portfolio;
exclude loans pledged to the PPPLF
from an institution’s total assets; and
exclude amounts borrowed from the
Federal Reserve Banks under the PPPLF
from an institution’s liabilities. In
addition, because participation in the
PPPLF and MMLF programs will have
the effect of expanding an IDI’s balance
sheet (and, by extension, its assessment
base), the FDIC is proposing to exclude
loans pledged to the PPPLF and assets
purchased under the MMLF in the
calculation of certain adjustments to an
IDI’s assessment rate, and to provide an
offset to an IDI’s total assessment
amount for the increase to its
assessment base attributable to
participation in the MMLF and PPPLF.
Finally, in defining IDIs for assessment
purposes, the FDIC would exclude from
an IDI’s total assets the amount of loans
pledged to the PPPLF and assets
purchased under the MMLF.
II. Background
Recent events have significantly and
adversely impacted the global economy
and financial markets. The spread of the
Coronavirus Disease (COVID–19) has
slowed economic activity in many
countries, including the United States.
Sudden disruptions in financial markets
have put increasing liquidity pressure
on money market mutual funds (MMFs)
and raised the cost of credit for most
borrowers. MMFs have faced
redemption requests from clients with
immediate cash needs and may need to
sell a significant number of assets to
meet these redemption requests, which
could further increase market pressures.
Small businesses also are facing severe
liquidity constraints and a collapse in
revenue streams, as millions of
Americans have been ordered to stay
home, severely reducing their ability to
engage in normal commerce. Many
small businesses have been forced to
close temporarily or furlough
employees
of assets to
meet these redemption requests, which
could further increase market pressures.
Small businesses also are facing severe
liquidity constraints and a collapse in
revenue streams, as millions of
Americans have been ordered to stay
home, severely reducing their ability to
engage in normal commerce. Many
small businesses have been forced to
close temporarily or furlough
employees. Continued access to
financing will be crucial for small
businesses to weather economic
disruptions caused by COVID–19 and,
ultimately, to help restore economic
activity.
In order to prevent the disruption in
the money markets from destabilizing
the financial system, on March 18, 2020,
the Board of Governors of the Federal
Reserve System (Board of Governors),
with approval of the Secretary of the
Treasury, authorized the Federal
Reserve Bank of Boston (FRBB) to
establish the MMLF, pursuant to section
13(3) of the Federal Reserve Act.2 Under
the MMLF, the FRBB is extending non-
recourse loans to eligible borrowers to
purchase assets from MMFs. Assets
purchased from MMFs will be posted as
collateral to the FRBB. Eligible
borrowers under the MMLF include
IDIs. Eligible collateral under the MMLF
includes U.S. Treasuries and fully
guaranteed agency securities, securities
issued by government-sponsored
enterprises, and certain types of
commercial paper. The MMLF is
scheduled to terminate on September
30, 2020, unless extended by the Board
of Governors.
As part of the Coronavirus Aid, Relief,
and Economic Security Act (CARES
Act) and in recognition of the exigent
circumstances faced by small
businesses, Congress created the PPP.3
PPP loans are fully guaranteed as to
principal and accrued interest by the
Small Business Administration (SBA),
the amount of each being determined at
the time the guarantee is exercised. As
a general matter, SBA guarantees are
backed by the full faith and credit of the
U.S. Government
) and in recognition of the exigent
circumstances faced by small
businesses, Congress created the PPP.3
PPP loans are fully guaranteed as to
principal and accrued interest by the
Small Business Administration (SBA),
the amount of each being determined at
the time the guarantee is exercised. As
a general matter, SBA guarantees are
backed by the full faith and credit of the
U.S. Government. PPP loans also afford
borrowers forgiveness up to the
principal amount of the PPP loan, if the
proceeds of the PPP loan are used for
certain expenses. The SBA reimburses
PPP lenders for any amount of a PPP
loan that is forgiven. PPP lenders are not
held liable for any representations made
by PPP borrowers in connection with a
borrower’s request for PPP loan
forgiveness.4
In order to provide liquidity to small
business lenders and the broader credit
markets, and to help stabilize the
financial system, on April 8, 2020, the
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Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
5 12 U.S.C. 343(3).
6 The maturity date of the extension of credit
under the PPPLF will be accelerated if the
underlying PPP loan goes into default and the
eligible borrower sells the PPP Loan to the SBA to
realize the SBA guarantee. The maturity date of the
extension of credit under the PPPLF also will be
accelerated to the extent of any PPP loan
forgiveness reimbursement received by the eligible
borrower from the SBA.
7 Under the SBA’s interim final rule, a lender may
request that the SBA purchase the expected
forgiveness amount of a PPP loan or pool of PPP
loans at the end of week seven of the covered
period. See Interim Final Rule ‘‘Business Loan
Program Temporary Changes; Paycheck Protection
Program,’’ 85 FR 20811, 20816 (Apr. 15, 2020).
8 See 85 FR 16232 (Mar. 23, 2020) and 85 FR
20387 (Apr. 13, 2020).
9 See 12 U.S.C. 1817(b).
10 See 12 CFR 327.3(b)(1)
est that the SBA purchase the expected
forgiveness amount of a PPP loan or pool of PPP
loans at the end of week seven of the covered
period. See Interim Final Rule ‘‘Business Loan
Program Temporary Changes; Paycheck Protection
Program,’’ 85 FR 20811, 20816 (Apr. 15, 2020).
8 See 85 FR 16232 (Mar. 23, 2020) and 85 FR
20387 (Apr. 13, 2020).
9 See 12 U.S.C. 1817(b).
10 See 12 CFR 327.3(b)(1).
11 See 12 CFR 327.5.
12 See 12 CFR 327.16(a) and (b).
13 As used in this proposed rule, the term ‘‘bank’’
is synonymous with the term ‘‘insured depository
institution’’ as it is used in section 3(c)(2) of the
Federal Deposit Insurance Act (FDI Act), 12 U.S.C.
1813(c)(2). As used in this proposed rule, the term
‘‘small bank’’ is synonymous with the term ‘‘small
institution’’ and the term ‘‘large bank’’ is
synonymous with the term ‘‘large institution’’ or
‘‘highly complex institution,’’ as the terms are
defined in 12 CFR 327.8.
14 See 12 CFR 327.16(a); see also 81 FR 32180
(May 20, 2016).
15 See 12 CFR 327.16(b); see also 76 FR 10672
(Feb. 25, 2011) and 77 FR 66000 (Oct. 31, 2012).
16 See 12 CFR 327.16(e).
17 See 12 CFR 327.16(b)(3); see also Assessment
Rate Adjustment Guidelines for Large and Highly
Complex Institutions, 76 FR 57992 (Sept. 19, 2011).
18 12 U.S.C. 1817 and 12 U.S.C. 1819 (Tenth).
19 As discussed in greater detail in the section on
the Paperwork Reduction Act, the agencies have
submitted requests for seven additional items on
the Call Report (FFIEC 031, FFIEC 041, and FFIEC
051): (1) The outstanding balance of PPP loans; (2)
the outstanding balance of loans pledged to the
PPPLF as of quarter-end; (3) the quarterly average
amount of loans pledged to the PPPLF; (4) the
Continued
Board of Governors, with approval of
the Secretary of the Treasury,
authorized each of the Federal Reserve
Banks to extend credit under the PPPLF,
pursuant to section 13(3) of the Federal
Reserve Act.5 Under the PPPLF, Federal
Reserve Banks are extending non-
recourse loans to institutions that
uarter-end; (3) the quarterly average
amount of loans pledged to the PPPLF; (4) the
Continued
Board of Governors, with approval of
the Secretary of the Treasury,
authorized each of the Federal Reserve
Banks to extend credit under the PPPLF,
pursuant to section 13(3) of the Federal
Reserve Act.5 Under the PPPLF, Federal
Reserve Banks are extending non-
recourse loans to institutions that are
eligible to make PPP loans, including
IDIs. Under the PPPLF, only PPP loans
that are guaranteed by the SBA with
respect to both principal and interest
and that are originated by an eligible
institution may be pledged as collateral
to the Federal Reserve Banks (loans
pledged to the PPPLF). The maturity
date of the extension of credit under the
PPPLF 6 equals the maturity date of the
PPP loans pledged to secure the
extension of credit.7 No new extensions
of credit will be made under the PPPLF
after September 30, 2020, unless
extended by the Board of Governors and
the Department of the Treasury.
To facilitate use of the MMLF and
PPPLF, the FDIC, Board of Governors,
and Comptroller of the Currency
(together, the agencies) adopted interim
final rules on March 23, 2020, and April
13, 2020, respectively, to allow banking
organizations to neutralize the
regulatory capital effects of purchasing
assets through the MMLF program and
loans pledged to the PPPLF.8 Consistent
with Section 1102 of the CARES Act,
the April 2020 interim final rule also
required banking organizations to apply
a zero percent risk weight to PPP loans
originated by the banking organization
under the PPP for purposes of the
banking organization’s risk-based
capital requirements
y capital effects of purchasing
assets through the MMLF program and
loans pledged to the PPPLF.8 Consistent
with Section 1102 of the CARES Act,
the April 2020 interim final rule also
required banking organizations to apply
a zero percent risk weight to PPP loans
originated by the banking organization
under the PPP for purposes of the
banking organization’s risk-based
capital requirements.
Deposit Insurance Assessments
Pursuant to Section 7 of the FDI Act,
the FDIC has established a risk-based
assessment system through which it
charges all IDIs an assessment amount
for deposit insurance.9 Under the FDIC’s
regulations, an IDI’s assessment is equal
to its assessment base multiplied by its
risk-based assessment rate.10 An IDI’s
assessment base and assessment rate are
determined each quarter based on
supervisory ratings and information
collected on the Consolidated Reports of
Condition and Income (Call Report) or
the Report of Assets and Liabilities of
U.S. Branches and Agencies of Foreign
Banks (FFIEC 002), as appropriate.
Generally, an IDI’s assessment base
equals its average consolidated total
assets minus its average tangible
equity.11 An IDI’s assessment rate is
calculated using different methods
based on whether the IDI is a small,
large, or highly complex institution.12
For assessment purposes, a large bank is
generally defined as an institution with
$10 billion or more in total assets, a
small bank is generally defined as an
institution with less than $10 billion in
total assets, and a highly complex bank
is generally defined as an institution
that has $50 billion or more in total
assets and is controlled by a parent
holding company that has $500 billion
or more in total assets, or is a processing
bank or trust company.13
Assessment rates for established small
banks are calculated based on eight risk
measures that are statistically significant
in predicting the probability of an
institution’s failure over a three-year
horizon.14 Large banks are assessed
usin
otal
assets and is controlled by a parent
holding company that has $500 billion
or more in total assets, or is a processing
bank or trust company.13
Assessment rates for established small
banks are calculated based on eight risk
measures that are statistically significant
in predicting the probability of an
institution’s failure over a three-year
horizon.14 Large banks are assessed
using a scorecard approach that
combines CAMELS ratings and certain
forward-looking financial measures to
assess the risk that a large bank poses to
the deposit insurance fund (DIF).15 All
institutions are subject to adjustments to
their assessment rates for certain
liabilities that can increase or reduce
loss to the DIF in the event the bank
fails.16 In addition, the FDIC may adjust
a large bank’s total score, which is used
in the calculation of its assessment rate,
based upon significant risk factors not
adequately captured in the appropriate
scorecard.17
Absent a change to the assessment
rules, an IDI that participates in the PPP,
PPPLF, or MMLF programs could be
subject to increased deposit insurance
assessments. For example, an institution
that holds PPP loans, including loans
pledged to the PPPLF, would increase
its total loan portfolio, all else equal,
which may increase its assessment rate.
An IDI that receives funding through the
PPPLF would increase the total assets
on its balance sheet (equal to the
amount of PPP pledged to the Federal
Reserve Banks), and increase its
liabilities by the same amount, which
would increase the IDI’s assessment
base and also may increase its
assessment rate. Similarly, an IDI that
participates in the MMLF would
increase its total assets by the amount of
assets purchased from MMFs under the
MMLF and increase its liabilities by the
same amount, which in turn would
increase its assessment base and may
also increase its assessment rate.
III. The Proposed Rule
A
would increase the IDI’s assessment
base and also may increase its
assessment rate. Similarly, an IDI that
participates in the MMLF would
increase its total assets by the amount of
assets purchased from MMFs under the
MMLF and increase its liabilities by the
same amount, which in turn would
increase its assessment base and may
also increase its assessment rate.
III. The Proposed Rule
A. Summary
The FDIC, under its general
rulemaking authority in Section 9 of the
FDI Act, and its specific authority under
Section 7 of the FDI Act to establish a
risk-based assessment system and set
assessments,18 is proposing to mitigate
the deposit insurance assessment effects
of holding PPP loans, pledging loans to
the PPPLF, and purchasing assets under
the MMLF. Under the proposal, an IDI
generally would not be subject to a
higher deposit insurance assessment
rate solely due to its participation in the
PPP, PPPLF, or MMLF. In addition, the
FDIC would provide an offset against an
IDI’s assessment amount for the increase
to its assessment base attributable to
participation in the MMLF and PPPLF.
Changes to reporting requirements
applicable to the Consolidated Reports
of Condition and Income (Call Report),
the Report of Assets and Liabilities of
U.S. Branches and Agencies of Foreign
Banks, and their respective instructions,
would be required in order to make the
proposed adjustments to the assessment
system. These changes are concurrently
being effectuated in coordination with
the other member entities of the Federal
Financial Institutions Examination
Council.19
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nd their respective instructions,
would be required in order to make the
proposed adjustments to the assessment
system. These changes are concurrently
being effectuated in coordination with
the other member entities of the Federal
Financial Institutions Examination
Council.19
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30652
Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
outstanding balance of borrowings from the Federal
Reserve Banks under the PPPLF with a remaining
maturity of one year or less, as of quarter-end; (5)
the outstanding balance of borrowings from the
Federal Reserve Banks under the PPPLF with a
remaining maturity of greater than one year, as of
quarter-end; (6) the outstanding amount of assets
purchased from MMFs under the MMLF as of
quarter-end; and (7) the quarterly average amount
of assets purchased under the MMLF. In addition,
the agencies have submitted requests for two
additional items on the Report of Assets and
Liabilities of U.S. Branches and Agencies of Foreign
Banks (FFIEC 002): the quarterly average amount of
loans pledged to the PPPLF and the quarterly
average amount of assets purchased from MMFs
under the MMLF. The FDIC is requesting these
items in order to make the proposed adjustments
described below.
20 The FDIC is not proposing to modify its
assessment pricing system with respect to the Tier
1 leverage ratio, which is one of the measures used
to determine the assessment rate for both large and
small IDIs. In accordance with the agencies’ April
13, 2020, interim final rule, banking organizations
are required to neutralize the regulatory capital
effects of assets pledged to the PPPLF on leverage
capital ratios. See 85 FR 20387 (April 13, 2020)
cing system with respect to the Tier
1 leverage ratio, which is one of the measures used
to determine the assessment rate for both large and
small IDIs. In accordance with the agencies’ April
13, 2020, interim final rule, banking organizations
are required to neutralize the regulatory capital
effects of assets pledged to the PPPLF on leverage
capital ratios. See 85 FR 20387 (April 13, 2020).
Therefore, the effects of participation in the PPPLF
will be automatically incorporated in an IDI’s
regulatory capital reporting and the FDIC does not
need to make any adjustments to an IDI’s deposit
insurance assessment.
21 At least 75 percent of the PPP loan proceeds
shall be used for payroll costs, and collateral is not
required to secure the loans. Therefore, the FDIC
expects that PPP loans will not be included in other
loan categories, such as those that are secured by
real estate or consumer loans, in measures used to
determine an IDI’s deposit insurance assessment
rate. See 85 FR 20811 (Apr. 15, 2020) and Slide 5,
Industry by NAICS Subsector, Paycheck Protection
Program (PPP) Report: Approvals through 12 p.m.
EST, April 16, 2020, Small Business
Administration, available at: https://
home.treasury.gov/system/files/136/
SBA%20PPP%20Loan%20Report%20Deck.pdf.
22 According to the instruction for the Call Report,
All Other Loans includes loans to finance
agricultural production and other loans to farmers
and loans to nondepository financial institutions.
23 The FDIC expects that IDIs that participate in
the PPP, PPPLF, and MMLF will earn additional
income from participation in these programs. To
minimize additional reporting burden, however, the
FDIC is not proposing to exclude income related to
participation in these programs from the net income
before taxes to total assets ratio in the calculation
of an IDI’s deposit insurance assessment rate
he FDIC expects that IDIs that participate in
the PPP, PPPLF, and MMLF will earn additional
income from participation in these programs. To
minimize additional reporting burden, however, the
FDIC is not proposing to exclude income related to
participation in these programs from the net income
before taxes to total assets ratio in the calculation
of an IDI’s deposit insurance assessment rate.
24 All Other Loans are not included in the LMI;
therefore, the FDIC proposes to exclude the
outstanding balance of PPP loans, which include
loans pledged to the PPPLF, first from the balance
of C&I Loans, followed by Agricultural Loans. The
loan categories used in the Loan Mix Index are:
Construction and Development, Commercial and
Industrial, Leases, Other Consumer, Real Estate
Loans Residual, Multifamily Residential, Nonfarm
Nonresidential, 1–4 Family Residential, Loans to
Depository Banks, Agricultural Real Estate,
Agricultural Loans. 12 CFR 327.16(a)(1)(ii)(B).
B. Mitigating the Effects of Loans
Pledged to the PPPLF and of PPP Loans
Held by an IDI on an IDI’s Assessment
Rate
To mitigate the assessment effect of
PPP loans, including loans pledged to
the PPPLF, the FDIC is proposing to
exclude PPP loans held by an IDI from
its loan portfolio for purposes of
calculating the IDI’s deposit insurance
assessment rate.20 Consistent with the
substantial protections from risk
provided by the Federal Reserve, the
FDIC is also proposing to modify
various risk measures to exclude loans
pledged to the PPPLF from total assets
and to exclude borrowings from the
Federal Reserve Banks under the PPPLF
from total liabilities when calculating an
IDI’s deposit insurance assessment rate
sit insurance
assessment rate.20 Consistent with the
substantial protections from risk
provided by the Federal Reserve, the
FDIC is also proposing to modify
various risk measures to exclude loans
pledged to the PPPLF from total assets
and to exclude borrowings from the
Federal Reserve Banks under the PPPLF
from total liabilities when calculating an
IDI’s deposit insurance assessment rate.
Based on data from the SBA and on
the terms of the PPP, the FDIC expects
that most PPP loans will be categorized
as Commercial and Industrial (C&I)
Loans.21 PPP loans may also be reported
in other loan types, including
Agricultural Loans and All Other
Loans.22 Under the proposed rule, and
to minimize reporting burden, the FDIC
would therefore exclude outstanding
PPP loans, which includes loans
pledged to the PPPLF, from an IDI’s loan
portfolio using assumptions under a
waterfall approach. First, the FDIC
would exclude the balance of PPP loans
outstanding, which includes loans
pledged to the PPPLF, from the balance
of C&I Loans. In the unlikely event that
the outstanding balance of PPP loans,
which includes loans pledged to the
PPPLF, exceeds the balance of C&I
Loans, the FDIC would exclude any
remaining balance of these loans from
the balance of All Other Loans, up to the
balance of All Other Loans, then
exclude any remaining balance of PPP
loans from the balance of Agricultural
Loans, up to the total amount of
Agricultural Loans. As described below,
the FDIC proposes to apply this
waterfall approach, as appropriate, in
the calculation of the Loan Mix Index
(LMI) for small banks, and in the
calculation of the growth-adjusted
portfolio concentration measure and
loss severity measure for large or highly
complex banks.
Question 1: The FDIC invites
comment on its proposal to apply a
waterfall approach in excluding PPP
loans, which include loans pledged to
the PPPLF, from C&I Loans, All Other
Loans, and Agricultural Loans in the
calculation of an IDI’s assessment rate
nd in the
calculation of the growth-adjusted
portfolio concentration measure and
loss severity measure for large or highly
complex banks.
Question 1: The FDIC invites
comment on its proposal to apply a
waterfall approach in excluding PPP
loans, which include loans pledged to
the PPPLF, from C&I Loans, All Other
Loans, and Agricultural Loans in the
calculation of an IDI’s assessment rate.
Is the assumption that all PPP loans are
C&I Loans appropriate, or should these
loans be distributed across loan
categories in another manner? Should
the FDIC collect additional data on how
PPP loans are categorized in order to
more accurately mitigate the deposit
insurance assessment effects of these
loans? Alternatively, should institutions
report PPP loans as a separate loan
category instead of including them in
C&I Loans or other loan categories, thus
providing data that would reduce the
need for the FDIC to rely on certain
assumptions, reduce the amount of
necessary changes to specific risk
measures and other factors, and
potentially more accurately mitigate the
deposit insurance assessment effects of
an IDI’s participation in the program?
Would this be overly burdensome for
institutions?
1. Established Small Institutions
a. Exclusion of Loans Pledged to the
PPPLF in Various Risk Measures
For established small banks, the
outstanding balance of loans pledged to
the PPPLF would be excluded from total
assets in the calculation of six risk
measures: The net income before taxes
to total assets ratio,23 the nonperforming
loans and leases to gross assets ratio, the
other real estate owned to gross assets
ratio, the brokered deposit ratio, the
one-year asset growth measure, and the
LMI.
b. Exclusion of PPP Loans and Loans
Pledged to the PPPLF in the LMI
The LMI is a measure of the extent to
which a bank’s total assets include
higher-risk categories of loans
taxes
to total assets ratio,23 the nonperforming
loans and leases to gross assets ratio, the
other real estate owned to gross assets
ratio, the brokered deposit ratio, the
one-year asset growth measure, and the
LMI.
b. Exclusion of PPP Loans and Loans
Pledged to the PPPLF in the LMI
The LMI is a measure of the extent to
which a bank’s total assets include
higher-risk categories of loans. In its
calculation of the LMI, the FDIC is
proposing to exclude PPP loans, which
include loans pledged to the PPPLF,
from an institution’s loan portfolio,
based on the waterfall approach
described above. Under the proposed
rule, the FDIC would therefore exclude
outstanding PPP loans, which includes
loans pledged to the PPPLF, from the
balance of C&I Loans in the calculation
of the LMI. In the unlikely event that the
outstanding balance of PPP loans, which
includes loans pledged to the PPPLF,
exceeds the balance of C&I Loans, the
FDIC would exclude any remaining
balance of these loans from the balance
of Agricultural Loans, up to the total
amount of Agricultural Loans, in the
calculation of the LMI.24 The FDIC is
also proposing to exclude loans pledged
to the PPPLF from total assets in the
calculation of the LMI.
2. Large and Highly Complex
Institutions
For IDIs defined as large or highly
complex for deposit insurance
assessment purposes, the FDIC is
proposing to exclude the outstanding
balance of loans pledged to the PPPLF
and borrowings from the Federal
Reserve Banks under the PPPLF from
five risk measures used in the scorecard
method: the core earnings ratio, the core
deposit ratio, the balance sheet liquidity
ratio, the average short-term funding
ratio and the loss severity measure. For
four risk measures—the growth-adjusted
portfolio concentration measure, the
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e risk measures used in the scorecard
method: the core earnings ratio, the core
deposit ratio, the balance sheet liquidity
ratio, the average short-term funding
ratio and the loss severity measure. For
four risk measures—the growth-adjusted
portfolio concentration measure, the
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Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
25 Appendix A to subpart A of 12 CFR part 327.
26 The FDIC expects that IDIs that participate in
the PPP, PPPLF, and MMLF will earn additional
income from participation in these programs. To
minimize additional reporting burden, the FDIC is
not proposing to exclude earnings related to
participation in these programs from the core
earnings ratio in the calculation of an IDI’s deposit
insurance assessment rate.
27 Appendix A to subpart A of 12 CFR part 327.
28 The balance sheet liquidity ratio is defined as
the sum of cash and balances due from depository
institutions, federal funds sold and securities
purchased under agreements to resell, and the
market value of available-for-sale and held-to-
maturity agency securities (excludes agency
mortgage-backed securities but includes all other
agency securities issued by the U.S. Treasury, U.S.
government agencies, and U.S. government
sponsored enterprises) divided by the sum of
federal funds purchased and repurchase
agreements, other borrowings (including FHLB)
with a remaining maturity of one year or less, 5
percent of insured domestic deposits, and 10
percent of uninsured domestic and foreign deposits.
Appendix A to subpart A of 12 CFR part 327.
29 Appendix A to subpart A of 12 CFR part 327
describes the average short-term funding ratio.
30 For large banks, the concentration measure is
the higher of the ratio of higher-risk assets to Tier
1 capital and reserves, and the growth-adjusted
portfolio measure
insured domestic deposits, and 10
percent of uninsured domestic and foreign deposits.
Appendix A to subpart A of 12 CFR part 327.
29 Appendix A to subpart A of 12 CFR part 327
describes the average short-term funding ratio.
30 For large banks, the concentration measure is
the higher of the ratio of higher-risk assets to Tier
1 capital and reserves, and the growth-adjusted
portfolio measure. For highly complex institutions,
the concentration measure is the highest of three
measures: The ratio of higher risk assets to Tier 1
capital and reserves, the ratio of top 20 counterparty
exposure to Tier 1 capital and reserves, and the
ratio of the largest counterparty exposure to Tier 1
capital and reserves. See Appendix A to subpart A
of part 327.
31 All Other Loans and Agricultural Loans are not
included in the growth-adjusted portfolio
concentration measure; therefore, the FDIC
proposes to exclude the outstanding balance of PPP
loans, which include loans pledged to the PPPLF,
from the balance of C&I Loans. The loan
concentration categories used in the growth-
adjusted portfolio concentration measure are:
Construction and development, other commercial
real estate, first lien residential mortgages
(including non-agency residential mortgage-backed
securities), closed-end junior liens and home equity
lines of credit, commercial and industrial loans,
credit card loans, and other consumer loans.
Appendix C to subpart A of 12 CFR part 327.
32 See 12 CFR 327.16(b)(2)(ii)(A)(2)(vii).
33 To minimize reporting burden, the FDIC would
reduce average loans by the outstanding balance of
PPP loans, which includes loans pledged to the
PPPLF, as of quarter-end, rather than requiring
institutions to additionally report the average
balance of PPP loans and the average balance of
loans pledged to the PPPLF.
34 Appendix D to subpart A of 12 CFR 327
describes the calculation of the loss severity
measure
ng burden, the FDIC would
reduce average loans by the outstanding balance of
PPP loans, which includes loans pledged to the
PPPLF, as of quarter-end, rather than requiring
institutions to additionally report the average
balance of PPP loans and the average balance of
loans pledged to the PPPLF.
34 Appendix D to subpart A of 12 CFR 327
describes the calculation of the loss severity
measure.
balance sheet liquidity ratio, the trading
asset ratio, and the loss severity
measure—the FDIC is proposing to treat
the outstanding balance of PPP loans,
which includes loans pledged to the
PPPLF, as riskless. These measures are
described in more detail below.
a. Core Earnings Ratio
For the core earnings ratio, the FDIC
divides the four-quarter sum of merger-
adjusted core earnings by the average of
five quarter-end total assets (most recent
and four prior quarters).25 The FDIC is
proposing to exclude the outstanding
balance of loans pledged to the PPPLF
at quarter-end from total assets for the
applicable quarter-end periods prior to
averaging.26
b. Core Deposit Ratio
The core deposit ratio is defined as
total domestic deposits excluding
brokered deposits and uninsured non-
brokered time deposits divided by total
liabilities.27 For purposes of this
calculation, the FDIC is proposing to
exclude from total liabilities borrowings
from Federal Reserve Banks under the
PPPLF.
c. Balance Sheet Liquidity Ratio
The balance sheet liquidity ratio
measures the amount of highly liquid
assets needed to cover potential cash
outflows in the event of stress.28 In
calculating this ratio, the FDIC is
proposing to treat the outstanding
balance of PPP loans as of quarter-end
that exceed borrowings from the Federal
Reserve Banks under the PPPLF as
riskless and to treat them as highly
liquid assets. The FDIC is also
proposing to exclude from the ratio an
IDI’s reported borrowings from the
Federal Reserve Banks under the PPPLF
with a remaining maturity of one year
or less.
d
the FDIC is
proposing to treat the outstanding
balance of PPP loans as of quarter-end
that exceed borrowings from the Federal
Reserve Banks under the PPPLF as
riskless and to treat them as highly
liquid assets. The FDIC is also
proposing to exclude from the ratio an
IDI’s reported borrowings from the
Federal Reserve Banks under the PPPLF
with a remaining maturity of one year
or less.
d. Average Short-Term Funding Ratio
The ratio of average short-term
funding to average total assets is one of
the measures used to determine the
assessment rate for a highly complex
IDI.29 In calculating the average short-
term funding ratio, the FDIC is
proposing to reduce the quarterly
average of total assets by the quarterly
average amount of loans pledged to the
PPPLF.
e. Growth-Adjusted Portfolio
Concentrations
The growth-adjusted portfolio
concentration measure is one of the
measures used to determine a large IDI’s
overall concentration measure.30 Under
the proposal, the FDIC would apply a
waterfall approach as described above
and assume that all outstanding PPP
loans, which include loans pledged to
the PPPLF, are categorized as C&I Loans
and would exclude these loans from C&I
Loans in the calculation of the portfolio
growth rate calculations for this
measure.31
f. Trading Asset Ratio
For highly complex IDIs, the trading
asset ratio is used to determine the
relative weights assigned to the credit
quality measure and the market risk
measure.32 In calculating this ratio, the
FDIC is proposing to reduce the balance
of loans by the outstanding balance as
of quarter-end of PPP loans, which
includes loans pledged to the PPPLF.33
g
or this
measure.31
f. Trading Asset Ratio
For highly complex IDIs, the trading
asset ratio is used to determine the
relative weights assigned to the credit
quality measure and the market risk
measure.32 In calculating this ratio, the
FDIC is proposing to reduce the balance
of loans by the outstanding balance as
of quarter-end of PPP loans, which
includes loans pledged to the PPPLF.33
g. Loss Severity Measure
The loss severity measure estimates
the relative magnitude of potential
losses to the DIF in the event of an IDI’s
failure.34 In calculating the loss severity
score, the FDIC is proposing to remove
the total amount of borrowings from the
Federal Reserve Banks under the PPPLF
from short- and long-term secured
borrowings, as appropriate. The FDIC
also would exclude PPP loans, which
include loans pledged to the PPPLF,
using a waterfall approach, described
above. Under this approach, the FDIC
would exclude PPP loans, which
include loans pledged to the PPPLF,
from an IDI’s balance of C&I Loans. In
the unlikely event that the outstanding
balance of PPP loans exceeds the
balance of C&I Loans, the FDIC would
exclude any remaining balance from All
Other Loans, up to the total amount of
All Other Loans, followed by
Agricultural Loans, up to the total
amount of Agricultural Loans. To the
extent that an IDI’s outstanding PPP
loans exceeds its borrowings under the
PPPLF, and consistent with the
treatment of these loans as riskless, the
FDIC would then add outstanding PPP
loans in excess of borrowings under the
PPPLF to cash.
Question 2: The FDIC invites
comment on its proposal to exclude PPP
loans from C&I Loans, All Other Loans,
and Agricultural Loans in the
calculation of an IDI’s assessment rate
nding PPP
loans exceeds its borrowings under the
PPPLF, and consistent with the
treatment of these loans as riskless, the
FDIC would then add outstanding PPP
loans in excess of borrowings under the
PPPLF to cash.
Question 2: The FDIC invites
comment on its proposal to exclude PPP
loans from C&I Loans, All Other Loans,
and Agricultural Loans in the
calculation of an IDI’s assessment rate.
Is the assumption that all PPP loans are
C&I loans appropriate, or should these
loans be distributed across loan
categories in another manner? If so, how
and why? Should the FDIC collect
additional data on how PPP loans are
categorized?
Question 3: The FDIC invites
comment on advantages and
disadvantages of mitigating the effects
of participating in the PPP and PPPLF
on deposit insurance assessments. How
does the approach in the proposed rule
support or not support the objectives of
the Paycheck Protection Program and
the associated liquidity facility?
C. Mitigating the Effects of Loans
Pledged to the PPPLF and Assets
Purchased Under the MMLF on Certain
Adjustments to an IDI’s Assessment
Rate
The FDIC proposes to exclude the
quarterly average amount of loans
pledged to the PPPLF and the quarterly
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35 For certain IDIs, adjustments include the
unsecured debt adjustment and the depository
institution debt adjustment (DIDA). The unsecured
debt adjustment decreases an IDI’s total assessment
rate based on the ratio of its long-term unsecured
debt to its assessment base. The DIDA increases an
IDI’s total assessment rate if it holds long-term,
unsecured debt issued by another IDI. In addition,
large banks that meet certain criteria and new small
banks are subject to the brokered deposit
adjustment
justment (DIDA). The unsecured
debt adjustment decreases an IDI’s total assessment
rate based on the ratio of its long-term unsecured
debt to its assessment base. The DIDA increases an
IDI’s total assessment rate if it holds long-term,
unsecured debt issued by another IDI. In addition,
large banks that meet certain criteria and new small
banks are subject to the brokered deposit
adjustment. The brokered deposit adjustment
increases the total assessment rate of large IDIs that
hold significant concentrations of brokered deposits
and that are less than well capitalized, not CAMELS
composite 1- or 2-rated, as well as new, small IDIs
that are not assigned to Risk Category I. See 12 CFR
327.16(e).
36 Under the proposed rule, the offset to the total
assessment amount due for the increase to the
assessment base attributable to participation in the
PPPLF and MMLF would apply to all IDIs,
including new small institutions as defined in 12
CFR 327.8(w), and insured U.S. branches and
agencies of foreign banks.
37 Currently, an IDI’s total assessment amount on
its quarterly certified statement invoice is equal to
the product of the institution’s assessment base
(calculated in accordance with 12 CFR 327.5)
multiplied by the institution’s assessment rate
(calculated in accordance with 12 CFR 327.4 and
12 CFR 327.16). See 12 CFR 327.3(b)(1).
38 These assumptions reflect current participation
in the PPP and PPPLF and an expectation of
increased participation in the PPPLF over time,
based on data published by the SBA and Federal
Reserve Board. These assumptions use SBA data to
estimate the participation in the PPP program of
nonbank lenders including CDFI funds, CDCs,
Microlenders, Farm Credit Lenders, and FinTechs
327.3(b)(1).
38 These assumptions reflect current participation
in the PPP and PPPLF and an expectation of
increased participation in the PPPLF over time,
based on data published by the SBA and Federal
Reserve Board. These assumptions use SBA data to
estimate the participation in the PPP program of
nonbank lenders including CDFI funds, CDCs,
Microlenders, Farm Credit Lenders, and FinTechs.
See Paycheck Protection Program (PPP) Report:
Second Round, Approvals from 4/27/2020 through
05/01/2020, Small Business Administration,
available at: https://www.sba.gov/sites/default/files/
2020–05/PPP2%20Data%2005012020.pdf; Factors
Affecting Reserve Balances, Federal Reserve
statistical release H.4.1, as of May 7, 2020, available
at: https://www.federalreserve.gov/releases/h41/
current/, and Board of Governors of the Federal
Reserve System as of April 1, 2020, available at
https://fred.stlouisfed.org/series/
H41RESPPALDBNWW.
average amount of assets purchased
under the MMLF from the calculation of
the unsecured debt adjustment,
depository institution debt adjustment,
and the brokered deposit adjustment.
These adjustments would continue to be
applied to an IDI’s initial base
assessment rate, as applicable, for
purposes of calculating the IDI’s total
base assessment rate.35
D. Offset To Deposit Insurance
Assessment Due to Increase in the
Assessment Base Attributable to Assets
Pledged to the PPPLF and Assets
Purchased Under the MMLF
Under the proposed rule, the FDIC
would provide an offset to an IDI’s total
assessment amount due for the increase
to its assessment base attributable to
participation in the PPPLF and
MMLF.36 To determine this offset
amount, the FDIC would calculate the
total of the quarterly average amount of
assets pledged to the PPPLF and the
quarterly average amount of assets
purchased under the MMLF, multiply
that amount by an IDI’s total base
assessment rate (after excluding the
effect of participation in the MMLF and
PPPLF, as proposed), and subtract the
re
on in the PPPLF and
MMLF.36 To determine this offset
amount, the FDIC would calculate the
total of the quarterly average amount of
assets pledged to the PPPLF and the
quarterly average amount of assets
purchased under the MMLF, multiply
that amount by an IDI’s total base
assessment rate (after excluding the
effect of participation in the MMLF and
PPPLF, as proposed), and subtract the
resulting amount from an IDI’s total
assessment amount.37
Question 4: The FDIC invites
comment on the advantages and
disadvantages of adjusting an IDI’s
assessment to offset the increase in its
assessment base due to participation in
the MMLF and PPPLF. How does the
approach in the proposed rule support
or not support the objectives of the
Facilities?
E. Classification of IDIs as Small, Large,
or Highly Complex for Assessment
Purposes
In defining IDIs for assessment
purposes, the FDIC would exclude from
an IDI’s total assets the amount of loans
pledged to the PPPLF and assets
purchased under the MMLF. As a result,
the FDIC would not reclassify a small
institution as large or a large institution
as a highly complex institution solely
due to participation in the PPPLF and
MMLF programs, which would
otherwise have the effect of expanding
an IDI’s balance sheet. In addition, an
institution with total assets between $5
billion and $10 billion, excluding the
amount of loans pledged to the PPPLF
and assets purchased under the MMLF,
may request that the FDIC determine its
assessment rate as a large institution.
F. Other Conforming Amendments to
the Assessment Regulations
The FDIC is proposing to make
conforming amendments to the FDIC’s
assessment regulations to effectuate the
modifications described above
billion and $10 billion, excluding the
amount of loans pledged to the PPPLF
and assets purchased under the MMLF,
may request that the FDIC determine its
assessment rate as a large institution.
F. Other Conforming Amendments to
the Assessment Regulations
The FDIC is proposing to make
conforming amendments to the FDIC’s
assessment regulations to effectuate the
modifications described above. These
conforming amendments would ensure
that the proposed modifications to an
IDI’s assessment rate and the proposed
offset to an IDI’s assessment payment
are properly incorporated into the
assessment regulation provisions
governing the calculation of an IDI’s
quarterly deposit insurance assessment.
G. Expected Effects
To facilitate participation in the PPP
and use of PPPLF and MMLF, the FDIC
is proposing to mitigate the deposit
insurance assessment effects of PPP
loans, loans pledged to the PPPLF, and
assets purchased under the MMLF.
Because IDIs are not yet reporting the
necessary data, the FDIC does not have
sufficient data on the distribution of
loans among IDIs and other non-bank
financial institutions made under the
PPP, loans pledged to the PPPLF, and
dollar volume of assets purchased under
the MMLF by IDIs, nor on the loan
categories of PPP loans held. Therefore,
the FDIC has estimated the potential
effects of these programs on deposit
insurance assessments based on certain
assumptions. Although this estimate is
subject to considerable uncertainty, the
FDIC estimates that absent the proposed
rule, PPP loans, loans pledged to the
PPPLF, and assets purchased under the
MMLF could increase quarterly
assessment revenue from IDIs by
approximately $90 million, based on the
assumptions described below.
The FDIC anticipates that PPP loans
will be held by both IDIs and non-IDIs,
and that some IDIs will hold PPP loans
without pledging them to the PPPLF,
although the rate of IDI participation in
the PPP and PPPLF is uncertain
PLF, and assets purchased under the
MMLF could increase quarterly
assessment revenue from IDIs by
approximately $90 million, based on the
assumptions described below.
The FDIC anticipates that PPP loans
will be held by both IDIs and non-IDIs,
and that some IDIs will hold PPP loans
without pledging them to the PPPLF,
although the rate of IDI participation in
the PPP and PPPLF is uncertain. Based
on Call Report data as of December 31,
2019, and assuming that (1) $600 billion
of PPP loans are held by IDIs, (2) the
PPP loans that are held by IDIs are
evenly distributed across all IDIs that
have C&I loans, which results in a 27
percent increase in those loans, (3) 25
percent of PPP loans held by IDIs are
pledged to the PPPLF, (4) 100 percent of
loans pledged to the PPPLF are matched
by borrowings from the Federal Reserve
Banks with maturities greater than one
year, and (5) large and highly complex
banks hold approximately $50 billion in
assets pledged under the MMLF,38 the
FDIC estimates that quarterly deposit
insurance assessments would increase
by approximately $90 million.
The actual effect of these programs on
deposit insurance assessments will vary
depending on participation in the
programs by IDIs and non-IDIs, the
maturity of borrowings from the Federal
Reserve Banks under these programs,
and the types of loans held under the
PPP, as described above.
H. Alternatives Considered
The FDIC considered the reasonable
and possible alternatives described
below. On balance, the FDIC believes
the current proposal would mitigate the
deposit insurance assessments effects of
an IDI’s participation in the PPP, PPPLF,
and MMLF in the most appropriate and
straightforward manner.
One alternative would be to leave in
place the current assessment
regulations. As a result, participation in
the PPP, PPPLF, and MMLF could have
the effect of increasing an IDI’s quarterly
deposit insurance assessment
proposal would mitigate the
deposit insurance assessments effects of
an IDI’s participation in the PPP, PPPLF,
and MMLF in the most appropriate and
straightforward manner.
One alternative would be to leave in
place the current assessment
regulations. As a result, participation in
the PPP, PPPLF, and MMLF could have
the effect of increasing an IDI’s quarterly
deposit insurance assessment. This
option, however, would not accomplish
the policy objective of mitigating the
assessment effects of holding PPP loans,
pledging loans to the PPPLF, and
purchasing assets under the MMLF and
would potentially lead to sharp
increases in assessments for an
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39 See Assessment Rate Adjustment Guidelines
for Large and Highly Complex Institutions, 76 FR
57992 (Sept. 19, 2011).
40 See CARES Act, § 1114.
41 5 U.S.C. 553.
42 5 U.S.C. 553(d).
individual IDI solely due to its
participation in programs intended to
provide liquidity to small businesses
and stabilize the financial system.
As described above, a second
alternative is that the FDIC could
require that institutions report PPP
loans as a separate loan category instead
of including them in C&I Loans or other
loan categories, as appropriate,
depending on the nature of the loan.
Under the current proposal, the FDIC
would exclude PPP loans from C&I
Loans, Agricultural Loans, and All
Other Loans using a waterfall approach
in the calculation of an IDI’s assessment
rate, and would have to apply certain
assumptions to do so. Under this
approach, the FDIC would assume that
all PPP loans are C&I Loans, and to the
extent that balance of PPP loans exceed
the balance of C&I Loans, any excess
loan amounts are assumed to be
categorized as either All Other Loans or
Agricultural Loans, as applicable for a
given measure
the calculation of an IDI’s assessment
rate, and would have to apply certain
assumptions to do so. Under this
approach, the FDIC would assume that
all PPP loans are C&I Loans, and to the
extent that balance of PPP loans exceed
the balance of C&I Loans, any excess
loan amounts are assumed to be
categorized as either All Other Loans or
Agricultural Loans, as applicable for a
given measure. Under the alternative
considered, institutions would report
PPP loans as a separate loan category,
thus providing data that would reduce
the need for the FDIC to rely on certain
assumptions, reduce the amount of
necessary changes to specific risk
measures and other factors, and
potentially more accurately mitigate the
deposit insurance assessment effects of
an IDI’s participation in the program.
The FDIC did not propose this
alternative due to concerns that it may
shift additional reporting burden onto
IDIs in comparison to the current
proposal, which would achieve a
similar result with less burden.
However, as mentioned below, the FDIC
is interested in feedback on this
alternative.
The FDIC also considered excluding
the effects of participation in the MMLF
from measures used to determine an
IDI’s deposit insurance assessment rate.
For example, an IDI that participates in
the MMLF could increase its total assets
by the amount of assets that are eligible
collateral pledged to the FRBB, and
increase its liabilities by the amount of
borrowings received from the FRBB
through the MMLF. With respect to the
MMLF, the FDIC expects a limited
number of IDIs to participate in the
program, and that all of these IDIs are
priced as large or highly complex
institutions. Furthermore, the FDIC
expects that participation in the MMLF
will have minimal to no effect on an
IDI’s deposit insurance assessment rate.
The MMLF is scheduled to cease on
September 30, 2020, and eligible
collateral includes a variety of assets,
including U.S
ted
number of IDIs to participate in the
program, and that all of these IDIs are
priced as large or highly complex
institutions. Furthermore, the FDIC
expects that participation in the MMLF
will have minimal to no effect on an
IDI’s deposit insurance assessment rate.
The MMLF is scheduled to cease on
September 30, 2020, and eligible
collateral includes a variety of assets,
including U.S. Treasuries and fully
guaranteed agency securities,
Certificates of Deposit, securities issued
by government-sponsored enterprises,
and certain types of commercial paper.
Given the minimal expected effect of
participation in the MMLF on an IDI’s
assessment rate and the short duration
of the program, and to minimize the
additional reporting burden associated
with the variety of potential assets in
the program, the FDIC decided not to
propose this alternative. Under the
proposal, the FDIC would exclude loans
pledged to the PPPLF and assets
purchased from the MMLF from the
calculation of certain adjustments to an
IDI’s assessment rate, and would
provide an offset to an IDI’s assessment
for the increase to its assessment base
attributable to participation in the
MMLF and PPPLF. In addition, an IDI
that is priced as large or highly complex
may request an adjustment to its total
score, used in determining an
institution’s assessment rate, based on
supporting data reflecting its
participation in the MMLF.39
Question 5: The FDIC invites
comment on the reasonable and
possible alternatives described in this
proposed rule. Should the FDIC
consider other reasonable and possible
alternatives?
I. Comment Period, Proposed Effective
Date and Application Date
The FDIC is issuing this proposal with
a 7-day comment period, in order to
allow sufficient time for the FDIC to
consider comments and ensure
publication of a final rule before June
30, 2020 (the end of the second
quarterly assessment period)
roposed rule. Should the FDIC
consider other reasonable and possible
alternatives?
I. Comment Period, Proposed Effective
Date and Application Date
The FDIC is issuing this proposal with
a 7-day comment period, in order to
allow sufficient time for the FDIC to
consider comments and ensure
publication of a final rule before June
30, 2020 (the end of the second
quarterly assessment period).
As stated above, in response to recent
events which have significantly and
adversely impacted global financial
markets along with the spread of
COVID–19, which has slowed economic
activity in many countries, including
the United States, the agencies moved
quickly due to exigent circumstances
and issued two interim final rules to
allow banking organizations to
neutralize the regulatory capital effects
of purchasing assets through the MMLF
program and loans pledged to the PPPL
Facility. Since the implementation of
the PPP, PPPLF, and MMLF, the FDIC
has observed uncertainty from the
public and the banking industry and
wants to provide clarity on how, if at
all, these programs would affect the
assessments of IDIs which participate in
these programs. Because PPP loans must
be issued by June 30, 2020, the full
assessment impact of these programs
will first occur in the second quarterly
assessment period. Congress has also
given indications that implementation
of these programs is an urgent policy
matter, instructing the SBA to issue
regulations for the PPP within 15 days
of the CARES Act’s enactment.40 The
FDIC has therefore concluded that rapid
administrative action is critical and
warrants an abbreviated comment
period.
The 7-day comment period will afford
the public and affected institutions with
an opportunity to review and comment
on the proposal, and will allow the
FDIC sufficient time to consider and
respond to comments received
PP within 15 days
of the CARES Act’s enactment.40 The
FDIC has therefore concluded that rapid
administrative action is critical and
warrants an abbreviated comment
period.
The 7-day comment period will afford
the public and affected institutions with
an opportunity to review and comment
on the proposal, and will allow the
FDIC sufficient time to consider and
respond to comments received. In
addition, a proposed effective date by
June 30, 2020 and a proposed
application date of April 1, 2020 will
enable the FDIC to provide the relief
contemplated in this rulemaking as soon
as practicable, starting with the second
quarter of 2020, and provide certainty to
IDIs regarding the assessment effects of
participating in the PPP, PPPLF, or
MMLF for the second quarter of 2020,
which is the first assessment quarter in
which the assessments will be affected.
IV. Request for Comment
The FDIC is requesting comment on
all aspects of the notice of proposed
rulemaking, in addition to the specific
requests for comment above.
V. Administrative Law Matters
A. Administrative Procedure Act
Under the Administrative Procedure
Act (APA),41 ‘‘[t]he required publication
or service of a substantive rule shall be
made not less than 30 days before its
effective date, except as otherwise
provided by the agency for good cause
found and published with the rule.’’ 42
Under this proposal, the amendments to
the FDIC’s deposit insurance assessment
regulations would be effective upon
publication of a final rule in the Federal
Register
‘‘[t]he required publication
or service of a substantive rule shall be
made not less than 30 days before its
effective date, except as otherwise
provided by the agency for good cause
found and published with the rule.’’ 42
Under this proposal, the amendments to
the FDIC’s deposit insurance assessment
regulations would be effective upon
publication of a final rule in the Federal
Register. It is anticipated that the FDIC
would find good cause that the
publication of a final rule implementing
the proposal can be less than 30 days
before its effective date in order to fully
effectuate the intent of ensuring that
IDIs benefit from the mitigation effects
to their deposit insurance assessments
as soon as practicable, and to provide
banks with certainty regarding the
assessment effects of participating in the
PPP, PPPLF, or MMLF for the second
quarter of 2020, which is the first
assessment quarter in which the
assessments will be affected.
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43 5 U.S.C. 601 et seq.
44 The SBA defines a small banking organization
as having $600 million or less in assets, where an
organization’s ‘‘assets are determined by averaging
the assets reported on its four quarterly financial
statements for the preceding year.’’ See 13 CFR
121.201 (as amended, effective August 19, 2019). In
its determination, the SBA ‘‘counts the receipts,
employees, or other measure of size of the concern
whose size is at issue and all of its domestic and
foreign affiliates.’’ 13 CFR 121.103. Following these
regulations, the FDIC uses a covered entity’s
affiliated and acquired assets, averaged over the
preceding four quarters, to determine whether the
covered entity is ‘‘small’’ for the purposes of RFA.
45 5 U.S.C. 601.
46 FDIC Call Report data, as of December 31, 2019
f size of the concern
whose size is at issue and all of its domestic and
foreign affiliates.’’ 13 CFR 121.103. Following these
regulations, the FDIC uses a covered entity’s
affiliated and acquired assets, averaged over the
preceding four quarters, to determine whether the
covered entity is ‘‘small’’ for the purposes of RFA.
45 5 U.S.C. 601.
46 FDIC Call Report data, as of December 31, 2019.
47 These assumptions reflect current participation
in the PPP and PPPLF and an expectation of
increased participation in the PPPLF over time,
based on data published by the SBA and Federal
Reserve Board. These assumptions use SBA data to
estimate the participation in the PPP program of
nonbank lenders including CDFI funds, CDCs,
Microlenders, Farm Credit Lenders, and FinTechs.
See Paycheck Protection Program (PPP) Report:
Second Round, Approvals from 4/27/2020 through
05/01/2020, Small Business Administration,
available at: https://www.sba.gov/sites/default/files/
2020-05/PPP2%20Data%2005012020.pdf; Factors
Affecting Reserve Balances, Federal Reserve
statistical release H.4.1, as of May 7, 2020, available
at: https://www.federalreserve.gov/releases/h41/
current/, and Board of Governors of the Federal
Reserve System as of April 1, 2020, available at
https://fred.stlouisfed.org/series/
H41RESPPALDBNWW.
48 5 U.S.C. 553(b)(B).
48 5 U.S.C. 553(d).
48 5 U.S.C. 601 et seq.
48 5 U.S.C. 801 et seq.
48 5 U.S.C. 801(a)(3).
48 5 U.S.C. 804(2).
48 5 U.S.C. 808(2).
48 12 U.S.C. 4802(a).
48 12 U.S.C. 4802(b).
49 4 U.S.C. 3501–3521.
As explained in the Supplementary
Information section, the FDIC expects
that an IDI that participates in either the
PPP, the PPPLF, or the MMLF program
could be subject to increased deposit
insurance assessments, beginning with
the second quarter of 2020. The FDIC
invoices for quarterly deposit insurance
assessments in arrears
U.S.C. 4802(a).
48 12 U.S.C. 4802(b).
49 4 U.S.C. 3501–3521.
As explained in the Supplementary
Information section, the FDIC expects
that an IDI that participates in either the
PPP, the PPPLF, or the MMLF program
could be subject to increased deposit
insurance assessments, beginning with
the second quarter of 2020. The FDIC
invoices for quarterly deposit insurance
assessments in arrears. As a result,
invoices for the second quarterly
assessment period of 2020 (i.e., April 1–
June 30) would be made available to
IDIs in September 2020, with a payment
due date of September 30, 2020.
While it is anticipated that the FDIC
would find good cause to issue the final
rule with an immediate effective date,
the FDIC is interested in the views of
the public and requests comment on all
aspects of the proposal.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA),
5 U.S.C. 601 et seq., generally requires
an agency, in connection with a
proposed rule, to prepare and make
available for public comment an initial
regulatory flexibility analysis that
describes the impact of a proposed rule
on small entities.43 However, a
regulatory flexibility analysis is not
required if the agency certifies that the
rule will not have a significant
economic impact on a substantial
number of small entities. The Small
Business Administration (SBA) has
defined ‘‘small entities’’ to include
banking organizations with total assets
of less than or equal to $600 million.44
Generally, the FDIC considers a
significant effect to be a quantified effect
in excess of 5 percent of total annual
salaries and benefits per institution, or
2.5 percent of total non-interest
expenses. The FDIC believes that effects
in excess of these thresholds typically
represent significant effects for FDIC-
insured institutions
th total assets
of less than or equal to $600 million.44
Generally, the FDIC considers a
significant effect to be a quantified effect
in excess of 5 percent of total annual
salaries and benefits per institution, or
2.5 percent of total non-interest
expenses. The FDIC believes that effects
in excess of these thresholds typically
represent significant effects for FDIC-
insured institutions. Certain types of
rules, such as rules of particular
applicability relating to rates or
corporate or financial structures, or
practices relating to such rates or
structures, are expressly excluded from
the definition of ‘‘rule’’ for purposes of
the RFA.45 The proposed rule relates
directly to the rates imposed on IDIs for
deposit insurance and to the deposit
insurance assessment system that
measures risk and determines each
established small bank’s assessment rate
and is, therefore, not subject to the RFA.
Nonetheless, the FDIC is voluntarily
presenting information in this RFA
section.
Based on quarterly regulatory report
data as of December 31, 2019, the FDIC
insures 5,186 depository institutions, of
which 3,841 are defined as small
entities by the terms of the RFA.46 The
proposed rule applies to all FDIC-
insured institutions, but is expected to
affect only those institutions that
participate in the PPP, PPPLF, and
MMLF. The FDIC does not presently
have access to information that would
enable it to identify which institutions
are participating in these programs and
lending facilities.
As previously discussed in this
Notice, to facilitate participation in the
PPP and use of PPPLF and MMLF, the
FDIC is proposing to mitigate the
deposit insurance assessment effects of
PPP loans, loans pledged to the PPPLF,
and assets purchased under the MMLF.
Therefore, the FDIC estimated the
potential effects of these programs on
deposit insurance assessments based on
certain assumptions
s previously discussed in this
Notice, to facilitate participation in the
PPP and use of PPPLF and MMLF, the
FDIC is proposing to mitigate the
deposit insurance assessment effects of
PPP loans, loans pledged to the PPPLF,
and assets purchased under the MMLF.
Therefore, the FDIC estimated the
potential effects of these programs on
deposit insurance assessments based on
certain assumptions. Based on Call
Report data as of December 31, 2019,
assuming that (1) $600 billion of PPP
loans are held by IDIs, (2) the PPP loans
that are held by IDIs are evenly
distributed across all IDIs that have C&I
loans, which results in a 27 percent
increase in those loans, (3) 25 percent of
PPP loans held by IDIs are pledged to
the PPPLF, and (4) 100 percent of loans
pledged to the PPPLF are matched by
borrowings from the Federal Reserve
Banks with maturities greater than one
year,47 the FDIC estimates that the
proposal would save small IDIs
approximately $5 million in quarterly
deposit insurance assessments.
The actual effect of these programs on
deposit insurance assessments will vary
depending on IDI’s participation in the
PPP and Federal Reserve Facilities, the
maturity of borrowings from the Federal
Reserve Banks under these programs,
and the types of loans held under the
PPP.
The FDIC invites comments on all
aspects of the supporting information
provided in this RFA section. In
particular, would this proposed rule
have any significant effects on small
entities that the FDIC has not identified?
C
n the
PPP and Federal Reserve Facilities, the
maturity of borrowings from the Federal
Reserve Banks under these programs,
and the types of loans held under the
PPP.
The FDIC invites comments on all
aspects of the supporting information
provided in this RFA section. In
particular, would this proposed rule
have any significant effects on small
entities that the FDIC has not identified?
C. Riegle Community Development and
Regulatory Improvement Act
Section 302 of the Riegle Community
Development and Regulatory
Improvement Act (RCDRIA) requires
that the Federal banking agencies,
including the FDIC, in determining the
effective date and administrative
compliance requirements of new
regulations that impose additional
reporting, disclosure, or other
requirements on IDIs, consider,
consistent with principles of safety and
soundness and the public interest, any
administrative burdens that such
regulations would place on depository
institutions, including small depository
institutions, and customers of
depository institutions, as well as the
benefits of such regulations. In addition,
section 302(b) of RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally to take
effect on the first day of a calendar
quarter that begins on or after the date
on which the regulations are published
in final form, with certain exceptions,
including for good cause.48 The FDIC
invites comments that will further
inform its consideration of RCDRIA.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) states that no agency may
conduct or sponsor, nor is the
respondent required to respond to, an
information collection unless it displays
a currently valid OMB control
number.49 The proposed rule affects the
agencies’ current information
collections for the Call Report (FFIEC
031, FFIEC 041, and FFIEC 051)
on of RCDRIA.
D. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) states that no agency may
conduct or sponsor, nor is the
respondent required to respond to, an
information collection unless it displays
a currently valid OMB control
number.49 The proposed rule affects the
agencies’ current information
collections for the Call Report (FFIEC
031, FFIEC 041, and FFIEC 051). The
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50 12 U.S.C. 4809.
agencies’ OMB control numbers for the
Call Reports are: Comptroller of the
Currency OMB No. 1557–0081; Board of
Governors OMB No. 7100–0036; and
FDIC OMB No. 3064–0052. The
proposed rule also affects the Report of
Assets and Liabilities of U.S. Branches
and Agencies of Foreign Banks (FFIEC
002), which the Federal Reserve System
collects and processes on behalf of the
three agencies (Board of Governors OMB
No. 7100–0032). Submissions will be
made by the agencies to OMB for their
respective information collections. The
changes to the Call Report, the Report of
Assets and Liabilities of U.S. Branches
and Agencies of Foreign Banks, and
their respective instructions, will be
addressed in a separate Federal Register
notice or notices.
E. Plain Language
Section 722 of the Gramm-Leach-
Bliley Act 50 requires the Federal
banking agencies to use plain language
in all proposed and final rulemakings
published in the Federal Register after
January 1, 2000. The FDIC invites your
comments on how to make this
proposed rule easier to understand
ve instructions, will be
addressed in a separate Federal Register
notice or notices.
E. Plain Language
Section 722 of the Gramm-Leach-
Bliley Act 50 requires the Federal
banking agencies to use plain language
in all proposed and final rulemakings
published in the Federal Register after
January 1, 2000. The FDIC invites your
comments on how to make this
proposed rule easier to understand. For
example:
• Has the FDIC organized the material
to suit your needs? If not, how could the
material be better organized?
• Are the requirements in the
proposed rule clearly stated? If not, how
could the proposed rule be stated more
clearly?
• Does the proposed rule contain
language or jargon that is unclear? If so,
which language requires clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the proposed rule
easier to understand?
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks,
banking, Savings associations.
Authority and Issuance
For the reasons stated above, the
Federal Deposit Insurance Corporation
proposes to amend 12 CFR part 327 as
follows:
PART 327—ASSESSMENTS
■1. The authority citation for part 327
is revised to read as follows:
Authority: 12 U.S.C. 1813, 1815, 1817–19,
1821.
■2. Amend § 327.3 by revising
paragraph (b)(1) to read as follows:
§ 327.3
Payment of assessments.
*
*
*
*
*
(b) * * *
(1) Quarterly certified statement
invoice. Starting with the first
assessment period of 2007, no later than
15 days prior to the payment date
specified in paragraph (b)(2) of this
section, the Corporation will provide to
each insured depository institution a
quarterly certified statement invoice
showing the amount of the assessment
payment due from the institution for the
prior quarter (net of credits or
dividends, if any), and the computation
of that amount
sment period of 2007, no later than
15 days prior to the payment date
specified in paragraph (b)(2) of this
section, the Corporation will provide to
each insured depository institution a
quarterly certified statement invoice
showing the amount of the assessment
payment due from the institution for the
prior quarter (net of credits or
dividends, if any), and the computation
of that amount. Subject to paragraph (e)
of this section and § 327.17, the
invoiced amount on the quarterly
certified statement invoice shall be the
product of the following: The
assessment base of the institution for the
prior quarter computed in accordance
with § 327.5 multiplied by the
institution’s rate for that prior quarter as
assigned to the institution pursuant to
§§ 327.4(a) and 327.16.
*
*
*
*
*
■3. Amend § 327.16 by adding
introductory text to read as follows:
§ 327.16
Assessment pricing methods—
beginning the first assessment period after
June 30, 2016, where the reserve ratio of the
DIF as of the end of the prior assessment
period has reached or exceeded 1.15
percent.
Subject to the modifications described
in § 327.17, the following pricing
methods shall apply beginning in the
first assessment period after June 30,
2016, where the reserve ratio of the DIF
as of the end of the prior assessment
period has reached or exceeded 1.15
percent, and for all subsequent
assessment periods.
*
*
*
*
*
■4. Add § 327.17 to read as follows:
§ 327.17
Mitigating the Deposit Insurance
Assessment Effect of participation in the
Money Market Mutual Fund Liquidity
Facility, the Paycheck Protection Program
Lending Facility, and the Paycheck
Protection Program.
f the end of the prior assessment
period has reached or exceeded 1.15
percent, and for all subsequent
assessment periods.
*
*
*
*
*
■4. Add § 327.17 to read as follows:
§ 327.17
Mitigating the Deposit Insurance
Assessment Effect of participation in the
Money Market Mutual Fund Liquidity
Facility, the Paycheck Protection Program
Lending Facility, and the Paycheck
Protection Program.
(a) Mitigating the assessment effects of
Paycheck Protection Program loans for
established small institutions. Effective
as of April 1, 2020, the FDIC will take
the following actions when calculating
the assessment rate for established small
institutions under § 327.16:
(1) Exclusion from net income before
taxes ratio, nonperforming loans and
leases ratio, other real estate owned
ratio, brokered deposit ratio, and one-
year asset growth measure.
Notwithstanding any other section of
this part, and as described in Appendix
E to this subpart, the FDIC will exclude
the outstanding balance of loans that are
pledged as collateral to the Paycheck
Protection Program Lending Facility, as
reported on the Consolidated Report of
Condition and Income, from the total
assets in the calculation of the following
risk measures: Net income before taxes
ratio, the nonperforming loans and
leases ratio, the other real estate owned
ratio, the brokered deposit ratio, and the
one-year asset growth measure, which
are described in § 327.16(a)(1)(ii)(A).
(2) Exclusion from Loan Mix Index.
Notwithstanding any other section of
this part, and as described in appendix
E to this subpart A, when calculating
the loan mix index described in
§ 327.16(a)(1)(ii)(B), the FDIC will
exclude:
leases ratio, the other real estate owned
ratio, the brokered deposit ratio, and the
one-year asset growth measure, which
are described in § 327.16(a)(1)(ii)(A).
(2) Exclusion from Loan Mix Index.
Notwithstanding any other section of
this part, and as described in appendix
E to this subpart A, when calculating
the loan mix index described in
§ 327.16(a)(1)(ii)(B), the FDIC will
exclude:
(i) The outstanding balance of loans
that are pledged as collateral to the
Paycheck Protection Program Lending
Facility, as reported on the Consolidated
Report of Condition and Income, from
the total assets; and
(ii) The amount of outstanding loans
provided as part of the Paycheck
Protection Program, including loans
pledged to the Paycheck Protection
Program Lending Facility, as reported
on the Consolidated Report of Condition
and Income, from an established small
institution’s balance of commercial and
industrial loans. To the extent that the
outstanding balance of loans provided
as part of the Paycheck Protection
Program, including loans pledged to the
Paycheck Protection Program Lending
Facility, exceeds an established small
institution’s balance of commercial and
industrial loans, the FDIC will exclude
any remaining balance of these loans
from the balance of agricultural loans,
up to the amount of agricultural loans,
in the calculation of the loan mix index.
(b) Mitigating the assessment effects
of Paycheck Protection Program loans
for large or highly complex institutions.
Effective as of April 1, 2020, the FDIC
will take the following actions when
calculating the assessment rate for large
institutions and highly complex
institutions under § 327.16:
ral loans,
up to the amount of agricultural loans,
in the calculation of the loan mix index.
(b) Mitigating the assessment effects
of Paycheck Protection Program loans
for large or highly complex institutions.
Effective as of April 1, 2020, the FDIC
will take the following actions when
calculating the assessment rate for large
institutions and highly complex
institutions under § 327.16:
(1) Exclusion from average short-term
funding ratio. Notwithstanding any
other section of this part, and as
described in appendix E of this subpart,
the FDIC will exclude the quarterly
average amount of loans that are
pledged as collateral to the Paycheck
Protection Program Lending Facility, as
reported on the Consolidated Report of
Condition and Income, from the
calculation of the average short-term
funding ratio, which is described in
appendix E to this subpart.
(2) Exclusion from core earnings ratio.
Notwithstanding any other section of
this part, and as described in appendix
E of this subpart, the FDIC will exclude
the outstanding balance of loans that are
pledged as collateral to the Paycheck
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Protection Program Lending Facility as
of quarter-end, as reported on the
Consolidated Report of Condition and
Income, from the calculation of the core
earnings ratio, which is described in
appendix E to this subpart.
(3) Exclusion from core deposit ratio.
Notwithstanding any other section of
this part, and as described in appendix
E of this subpart, the FDIC will exclude
the amount of borrowings from the
Federal Reserve Banks under the
Paycheck Protection Program Lending
Facility, as reported on the Consolidated
Report of Condition and Income, from
the calculation of the core deposit ratio,
which is described in appendix E to this
subpart.
twithstanding any other section of
this part, and as described in appendix
E of this subpart, the FDIC will exclude
the amount of borrowings from the
Federal Reserve Banks under the
Paycheck Protection Program Lending
Facility, as reported on the Consolidated
Report of Condition and Income, from
the calculation of the core deposit ratio,
which is described in appendix E to this
subpart.
(4) Exclusion from growth-adjusted
portfolio concentration measure and
trading asset ratio. Notwithstanding any
other section of this part, and as
described in appendix E to this subpart,
the FDIC will exclude, as applicable, the
outstanding balance of loans provided
under the Paycheck Protection Program,
including loans pledged to the Paycheck
Protection Program Lending Facility, as
reported on the Consolidated Report of
Condition and Income, from the
calculation of the growth-adjusted
portfolio concentration measure and the
trading asset ratio, which are described
in appendix E to this subpart.
(5) Balance sheet liquidity ratio.
Notwithstanding any other section of
this part, and as described in appendix
E to this subpart, when calculating the
balance sheet liquidity measure
described under appendix A to this
subpart, the FDIC will include the
outstanding balance of loans provided
under the Paycheck Protection Program
that exceed total borrowings from the
Federal Reserve Banks under the
Paycheck Protection Program Lending
Facility, as reported on the Consolidated
Report of Condition and Income in
highly liquid assets, and exclude the
amount of borrowings from the Federal
Reserve Banks under the Paycheck
Protection Program Lending Facility
with a remaining maturity of one year
or less, as reported on the Consolidated
Report of Condition and Income from
other borrowings with a remaining
maturity of one year or less.
as reported on the Consolidated
Report of Condition and Income in
highly liquid assets, and exclude the
amount of borrowings from the Federal
Reserve Banks under the Paycheck
Protection Program Lending Facility
with a remaining maturity of one year
or less, as reported on the Consolidated
Report of Condition and Income from
other borrowings with a remaining
maturity of one year or less.
(6) Exclusion from loss severity
measure. Notwithstanding any other
section of this part, and as described in
appendix E to this subpart, when
calculating the loss severity measure
described under appendix A to this
subpart, the FDIC will exclude the total
amount of borrowings from the Federal
Reserve Banks under the Paycheck
Protection Program Lending Facility
from short- and long-term secured
borrowings, as appropriate. The FDIC
will exclude the total amount of
outstanding loans provided as part of
the Paycheck Protection Program, as
reported on the Consolidated Report of
Condition and Income, from an
institution’s balance of commercial and
industrial loans. To the extent that the
outstanding balance of loans provided
as part of the Paycheck Protection
Program exceeds an institution’s
balance of commercial and industrial
loans, the FDIC will exclude any
remaining balance from all other loans,
up to the total amount of all other loans,
followed by agricultural loans, up to the
total amount of agricultural loans. To
the extent that an institution’s
outstanding loans under the Paycheck
Protection Program exceeds its
borrowings under the Paycheck
Protection Program Loan Facility, the
FDIC will add outstanding loans under
the Paycheck Protection Program in
excess of borrowings under the
Paycheck Protection Program Loan
Facility to cash and interest-bearing
balances.
l amount of agricultural loans. To
the extent that an institution’s
outstanding loans under the Paycheck
Protection Program exceeds its
borrowings under the Paycheck
Protection Program Loan Facility, the
FDIC will add outstanding loans under
the Paycheck Protection Program in
excess of borrowings under the
Paycheck Protection Program Loan
Facility to cash and interest-bearing
balances.
(c) Mitigating the effects of loans
pledged to the PPPLF and assets
purchased under the MMLF on the
unsecured adjustment, depository
institution debt adjustment, and the
brokered deposit adjustment to an IDI’s
assessment rate. Notwithstanding any
other section of this part, and as
described in appendix E to this subpart,
when calculating an insured depository
institution’s unsecured debt adjustment,
depository institution debt adjustment,
or the brokered deposit adjustment
described in § 327.16(e), as applicable,
the FDIC will exclude the quarterly
average amount of loans pledged to the
Paycheck Protection Program Lending
Facility and the quarterly average
amount of assets purchased under the
Money Market Mutual Fund Liquidity
Facility, as reported on the Consolidated
Report of Condition and Income.
(d) Mitigating the effects on the
assessment base attributable to the
Paycheck Protection Program Lending
Facility and the Money Market Mutual
Fund Liquidity Facility.
Notwithstanding any other section of
this part, and as described in appendix
E to this subpart, when calculating an
insured depository institution’s
quarterly deposit insurance assessment
payment due under this part, the FDIC
will provide an offset to an institution’s
assessment for the increase to its
assessment base attributable to
participation in the Money Market
Mutual Fund Liquidity Facility and the
Paycheck Protection Program Lending
Facility.
n appendix
E to this subpart, when calculating an
insured depository institution’s
quarterly deposit insurance assessment
payment due under this part, the FDIC
will provide an offset to an institution’s
assessment for the increase to its
assessment base attributable to
participation in the Money Market
Mutual Fund Liquidity Facility and the
Paycheck Protection Program Lending
Facility.
(1) Calculation of offset amount. To
determine the offset amount, the FDIC
will take the sum of the quarterly
average amount of loans pledged to the
Paycheck Protection Program Lending
Facility and the quarterly average
amount of assets purchased under the
Money Market Mutual Fund Liquidity
Facility, and multiply the sum by an
institution’s total base assessment rate,
as calculated under § 327.16, including
any adjustments under § 327.16(e).
(2) Calculation of assessment amount
due. Notwithstanding any other section
of this part, the FDIC will subtract the
offset amount described in
§ 327.17(d)(1) from an insured
depository institution’s total assessment
amount.
(e) Definitions. For the purposes of
this section:
(1) Paycheck Protection Program. The
term ‘‘Paycheck Protection Program’’
means the program that was created in
section 1102 of the Coronavirus Aid,
Relief, and Economic Security Act.
(2) Paycheck Protection Program
Liquidity Facility. The term ‘‘Paycheck
Protection Program Liquidity Facility’’
means the program of that name that
was announced by the Board of
Governors of the Federal Reserve
System on April 9, 2020.
. The
term ‘‘Paycheck Protection Program’’
means the program that was created in
section 1102 of the Coronavirus Aid,
Relief, and Economic Security Act.
(2) Paycheck Protection Program
Liquidity Facility. The term ‘‘Paycheck
Protection Program Liquidity Facility’’
means the program of that name that
was announced by the Board of
Governors of the Federal Reserve
System on April 9, 2020.
(3) Money Market Mutual Fund
Liquidity Facility. The term ‘‘Money
Market Mutual Fund Liquidity Facility’’
means the program of that name
announced by the Board of Governors of
the Federal Reserve System on March
18, 2020.
■5. Add Appendix E to subpart A of
part 327 to read as follows:
Appendix E to Subpart A of Part 327—
Mitigating the Deposit Insurance
Assessment Effect of Participation in
the Money Market Mutual Fund
Liquidity Facility, the Paycheck
Protection Program Lending Facility,
and the Paycheck Protection Program
I. Mitigating the Assessment Effects of
Paycheck Protection Program Loans for
Established Small Institutions
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TABLE E.1—EXCLUSIONS FROM CERTAIN RISK MEASURES USED TO CALCULATE THE ASSESSMENT RATE FOR
ESTABLISHED SMALL INSTITUTIONS
Variables
Description
Exclusions
Leverage Ratio (%) .........................
Tier 1 capital divided by adjusted average assets. (Numerator and
denominator are both based on the definition for prompt corrective
action.).
No Exclusion.
Net Income before Taxes/Total As-
sets (%).
Income (before applicable income taxes and discontinued operations)
for the most recent twelve months divided by total assets 1.
Exclude from total assets the bal-
ance of loans pledged to the
PPPLF outstanding at end of
quarter.
Nonperforming Loans and Leases/
Gross Assets (%)
based on the definition for prompt corrective
action.).
No Exclusion.
Net Income before Taxes/Total As-
sets (%).
Income (before applicable income taxes and discontinued operations)
for the most recent twelve months divided by total assets 1.
Exclude from total assets the bal-
ance of loans pledged to the
PPPLF outstanding at end of
quarter.
Nonperforming Loans and Leases/
Gross Assets (%).
Sum of total loans and lease financing receivables past due 90 or
more days and still accruing interest and total nonaccrual loans
and lease financing receivables (excluding, in both cases, the max-
imum amount recoverable from the U.S. Government, its agencies
or government-sponsored enterprises, under guarantee or insur-
ance provisions) divided by gross assets 2.
Exclude from total assets the bal-
ance of loans pledged to the
PPPLF outstanding at end of
quarter.
Other Real Estate Owned/Gross
Assets (%).
Other real estate owned divided by gross assets 2 ...............................
Exclude from total assets the bal-
ance of loans pledged to the
PPPLF outstanding at end of
quarter.
Brokered Deposit Ratio ...................
The ratio of the difference between brokered deposits and 10 percent
of total assets to total assets. For institutions that are well capital-
ized and have a CAMELS composite rating of 1 or 2, brokered re-
ciprocal deposits as defined in § 327.8(q) are deducted from bro-
kered deposits. If the ratio is less than zero, the value is set to
zero.
Exclude from total assets (in both
numerator and denominator) the
balance of loans pledged to the
PPPLF outstanding at end of
quarter.
Weighted Average of C, A, M, E, L,
and S Component Ratings.
The weighted sum of the ‘‘C,’’ ‘‘A,’’ ‘‘M,’’ ‘‘E’’, ‘‘L’’, and ‘‘S’’ CAMELS
components, with weights of 25 percent each for the ‘‘C’’ and ‘‘M’’
components, 20 percent for the ‘‘A’’ component, and 10 percent
each for the ‘‘E’’, ‘‘L’’ and ‘‘S’’ components.
No Exclusion.
Loan Mix Index ...............................
t end of
quarter.
Weighted Average of C, A, M, E, L,
and S Component Ratings.
The weighted sum of the ‘‘C,’’ ‘‘A,’’ ‘‘M,’’ ‘‘E’’, ‘‘L’’, and ‘‘S’’ CAMELS
components, with weights of 25 percent each for the ‘‘C’’ and ‘‘M’’
components, 20 percent for the ‘‘A’’ component, and 10 percent
each for the ‘‘E’’, ‘‘L’’ and ‘‘S’’ components.
No Exclusion.
Loan Mix Index ................................
A measure of credit risk described paragraph (A) of this section ........
Exclusions are described in para-
graph (A) of this section..
One-Year Asset Growth (%) ...........
Growth in assets (adjusted for mergers 3) over the previous year in
excess of 10 percent.4 If growth is less than 10 percent, the value
is set to zero.
Exclude from total assets (in both
numerator and denominator) the
balance of loans pledged to the
PPPLF outstanding at end of
quarter.
1 The ratio of Net Income before Taxes to Total Assets is bounded below by (and cannot be less than) ¥25 percent and is bounded above by
(and cannot exceed) 3 percent.
2 Gross assets are total assets plus the allowance for loan and lease financing receivable losses (ALLL) or allowance for credit losses, as ap-
plicable.
3 Growth in assets is also adjusted for acquisitions of failed banks.
4 The maximum value of the Asset Growth measure is 230 percent; that is, asset growth (merger adjusted) over the previous year in excess of
240 percent (230 percentage points in excess of the 10 percent threshold) will not further increase a bank’s assessment rate.
(A) Definition of Loan Mix Index. The Loan
Mix Index assigns loans in an institution’s
loan portfolio to the categories of loans
described in the following table. Exclude
from the balance of commercial and
industrial loans the balance of PPP loans,
which includes loans pledged to the PPPLF,
outstanding at end of quarter
percent threshold) will not further increase a bank’s assessment rate.
(A) Definition of Loan Mix Index. The Loan
Mix Index assigns loans in an institution’s
loan portfolio to the categories of loans
described in the following table. Exclude
from the balance of commercial and
industrial loans the balance of PPP loans,
which includes loans pledged to the PPPLF,
outstanding at end of quarter. In the event
that the balance of outstanding PPP loans,
which includes loans pledged to the PPPLF,
exceeds the balance of commercial and
industrial loans, exclude the remaining
balance from the balance of agricultural
loans, up to the total amount of agricultural
loans. The Loan Mix Index is calculated by
multiplying the ratio of an institution’s
amount of loans in a particular loan category
to its total assets, excluding the balance of
loans pledged to the PPPLF outstanding at
end of quarter by the associated weighted
average charge-off rate for that loan category,
and summing the products for all loan
categories. The table gives the weighted
average charge-off rate for each category of
loan. The Loan Mix Index excludes credit
card loans.
LOAN MIX INDEX CATEGORIES AND
WEIGHTED CHARGE-OFF RATE PER-
CENTAGES
Weighted
charge-off
rate
percent
Construction & Development ......
4.4965840
Commercial & Industrial .............
1.5984506
Leases ........................................
1.4974551
Other Consumer .........................
1.4559717
Real Estate Loans Residual .......
1.0169338
LOAN MIX INDEX CATEGORIES AND
WEIGHTED CHARGE-OFF RATE PER-
CENTAGES—Continued
Weighted
charge-off
rate
percent
Multifamily Residential ................
0.8847597
Nonfarm Nonresidential ..............
0.7289274
I–4 Family Residential ................
0.6973778
Loans to Depository banks .........
0.5760532
Agricultural Real Estate ..............
0.2376712
Agriculture ...................................
0.2432737
II
WEIGHTED CHARGE-OFF RATE PER-
CENTAGES—Continued
Weighted
charge-off
rate
percent
Multifamily Residential ................
0.8847597
Nonfarm Nonresidential ..............
0.7289274
I–4 Family Residential ................
0.6973778
Loans to Depository banks .........
0.5760532
Agricultural Real Estate ..............
0.2376712
Agriculture ...................................
0.2432737
II. Mitigating the Assessment Effects of
Paycheck Protection Program Loans for
Large or Highly Complex Institutions
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TABLE E.2—EXCLUSIONS FROM CERTAIN RISK MEASURES USED TO CALCULATE THE ASSESSMENT RATE FOR LARGE OR
HIGHLY COMPLEX INSTITUTIONS
Scorecard measures 1
Description
Exclusions
Leverage Ratio ................................
Tier 1 capital for Prompt Corrective Action (PCA) divided by adjusted
average assets based on the definition for prompt corrective action.
No Exclusion.
Concentration Measure for Large
Insured
depository
institutions
(excluding Highly Complex Insti-
tutions).
The concentration score for large institutions is the higher of the fol-
lowing two scores:.
(1) Higher-Risk Assets/Tier 1 Cap-
ital and Reserves.
Sum of construction and land development (C&D) loans (funded and
unfunded), higher-risk commercial and industrial (C&I) loans (fund-
ed and unfunded), nontraditional mortgages, higher-risk consumer
loans, and higher-risk securitizations divided by Tier 1 capital and
reserves. See Appendix C for the detailed description of the ratio.
No Exclusion.
(2) Growth-Adjusted Portfolio Con-
centrations.
The measure is calculated in the following steps: ................................
-risk commercial and industrial (C&I) loans (fund-
ed and unfunded), nontraditional mortgages, higher-risk consumer
loans, and higher-risk securitizations divided by Tier 1 capital and
reserves. See Appendix C for the detailed description of the ratio.
No Exclusion.
(2) Growth-Adjusted Portfolio Con-
centrations.
The measure is calculated in the following steps: ................................
(1) Concentration levels (as a ratio to Tier 1 capital and reserves) are
calculated for each broad portfolio category:.
• Constructions and land development (C&D) .....................................
• Other commercial real estate loans ...................................................
• First lien residential mortgages (including non-agency residential
mortgage-backed securities).
• Closed-end junior liens and home equity lines of credit (HELOCs) ..
• Commercial and industrial loans (C&I) ..............................................
• Credit card loans, and .......................................................................
• Other consumer loans .......................................................................
(2) Risk weights are assigned to each loan category based on histor-
ical loss rates.
(3) Concentration levels are multiplied by risk weights and squared to
produce a risk-adjusted concentration ratio for each portfolio.
(4) Three-year merger-adjusted portfolio growth rates are then scaled
to a growth factor of 1 to 1.2 where a 3-year cumulative growth
rate of 20 percent or less equals a factor of 1 and a growth rate of
80 percent or greater equals a factor of 1.2. If three years of data
are not available, a growth factor of 1 will be assigned.
Exclude from C&I loan growth rate
the amount of PPP loans, which
includes loans pledged to the
PPPLF, outstanding at end of
quarter.
to a growth factor of 1 to 1.2 where a 3-year cumulative growth
rate of 20 percent or less equals a factor of 1 and a growth rate of
80 percent or greater equals a factor of 1.2. If three years of data
are not available, a growth factor of 1 will be assigned.
Exclude from C&I loan growth rate
the amount of PPP loans, which
includes loans pledged to the
PPPLF, outstanding at end of
quarter.
(5) The risk-adjusted concentration ratio for each portfolio is multi-
plied by the growth factor and resulting values are summed.
See Appendix C for the detailed description of the measure ...............
Concentration Measure for Highly
Complex Institutions.
Concentration score for highly complex institutions is the highest of
the following three scores:.
(1) Higher-Risk Assets/Tier 1 Cap-
ital and Reserves.
Sum of C&D loans (funded and unfunded), higher-risk C&I loans
(funded and unfunded), nontraditional mortgages, higher-risk con-
sumer loans, and higher-risk securitizations divided by Tier 1 cap-
ital and reserves. See Appendix C for the detailed description of
the measure.
No Exclusion.
(2) Top 20 Counterparty Exposure/
Tier 1 Capital and Reserves.
Sum of the 20 largest total exposure amounts to counterparties di-
vided by Tier 1 capital and reserves. The total exposure amount is
equal to the sum of the institution’s exposure amounts to one
counterparty (or borrower) for derivatives, securities financing
transactions (SFTs), and cleared transactions, and its gross lend-
ing exposure (including all unfunded commitments) to that
counterparty (or borrower). A counterparty includes an entity’s own
affiliates. Exposures to entities that are affiliates of each other are
treated
as
exposures
to
one
counterparty
(or
borrower).
Counterparty exposure excludes all counterparty exposure to the
U.S. Government and departments or agencies of the U.S. Gov-
ernment that is unconditionally guaranteed by the full faith and
credit of the United States
). A counterparty includes an entity’s own
affiliates. Exposures to entities that are affiliates of each other are
treated
as
exposures
to
one
counterparty
(or
borrower).
Counterparty exposure excludes all counterparty exposure to the
U.S. Government and departments or agencies of the U.S. Gov-
ernment that is unconditionally guaranteed by the full faith and
credit of the United States. The exposure amount for derivatives,
including OTC derivatives, cleared transactions that are derivative
contracts, and netting sets of derivative contracts, must be cal-
culated using the methodology set forth in 12 CFR 324.34(b), but
without any reduction for collateral other than cash collateral that is
all or part of variation margin and that satisfies the requirements of
12 CFR 324.10(c)(4)(ii)(C)(1)(ii) and (iii) and 324.10(c)(4)(ii)(C)(3)
through (7). The exposure amount associated with SFTs, including
cleared transactions that are SFTs, must be calculated using the
standardized approach set forth in 12 CFR 324.37(b) or (c). For
both derivatives and SFT exposures, the exposure amount to cen-
tral counterparties must also include the default fund contribution.
No Exclusion.
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TABLE E.2—EXCLUSIONS FROM CERTAIN RISK MEASURES USED TO CALCULATE THE ASSESSMENT RATE FOR LARGE OR
HIGHLY COMPLEX INSTITUTIONS—Continued
Scorecard measures 1
Description
Exclusions
Exclusion.
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Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
TABLE E.2—EXCLUSIONS FROM CERTAIN RISK MEASURES USED TO CALCULATE THE ASSESSMENT RATE FOR LARGE OR
HIGHLY COMPLEX INSTITUTIONS—Continued
Scorecard measures 1
Description
Exclusions
(3) Largest Counterparty Exposure/
Tier 1 Capital and Reserves.
The largest total exposure amount to one counterparty divided by
Tier 1 capital and reserves. The total exposure amount is equal to
the sum of the institution’s exposure amounts to one counterparty
(or borrower) for derivatives, SFTs, and cleared transactions, and
its gross lending exposure (including all unfunded commitments) to
that counterparty (or borrower). A counterparty includes an entity’s
own affiliates. Exposures to entities that are affiliates of each other
are treated as exposures to one counterparty (or borrower).
Counterparty exposure excludes all counterparty exposure to the
U.S. Government and departments or agencies of the U.S. Gov-
ernment that is unconditionally guaranteed by the full faith and
credit of the United States. The exposure amount for derivatives,
including OTC derivatives, cleared transactions that are derivative
contracts, and netting sets of derivative contracts, must be cal-
culated using the methodology set forth in 12 CFR 324.34(b), but
without any reduction for collateral other than cash collateral that is
all or part of variation margin and that satisfies the requirements of
12 CFR 324.10(c)(4)(ii)(C)(1)(ii) and (iii) and 324.10(c)(4)(ii)(C)(3)
through (7). The exposure amount associated with SFTs, including
cleared transactions that are SFTs, must be calculated using the
standardized approach set forth in 12 CFR 324.37(b) or (c). For
both derivatives and SFT exposures, the exposure amount to cen-
tral counterparties must also include the default fund contribution.
No Exclusion
c)(4)(ii)(C)(1)(ii) and (iii) and 324.10(c)(4)(ii)(C)(3)
through (7). The exposure amount associated with SFTs, including
cleared transactions that are SFTs, must be calculated using the
standardized approach set forth in 12 CFR 324.37(b) or (c). For
both derivatives and SFT exposures, the exposure amount to cen-
tral counterparties must also include the default fund contribution.
No Exclusion.
Core
Earnings/Average
Quarter-
End Total Assets.
Core earnings are defined as net income less extraordinary items
and tax-adjusted realized gains and losses on available-for-sale
(AFS) and held-to-maturity (HTM) securities, adjusted for mergers.
The ratio takes a four-quarter sum of merger-adjusted core earn-
ings and divides it by an average of five quarter-end total assets
(most recent and four prior quarters). If four quarters of data on
core earnings are not available, data for quarters that are available
will be added and annualized. If five quarters of data on total as-
sets are not available, data for quarters that are available will be
averaged.
Prior to averaging, exclude from
total assets for the applicable
quarter-end periods the balance
of loans pledged to the PPPLF
outstanding at end of quarter.
Credit Quality Measure 1 .................
The credit quality score is the higher of the following two scores: .......
(1) Criticized and Classified Items/
Tier 1 Capital and Reserves.
Sum of criticized and classified items divided by the sum of Tier 1
capital and reserves. Criticized and classified items include items
an institution or its primary federal regulator have graded ‘‘Special
Mention’’ or worse and include retail items under Uniform Retail
Classification Guidelines, securities, funded and unfunded loans,
other real estate owned (ORE), other assets, and marked-to-mar-
ket counterparty positions, less credit valuation adjustments. Criti-
cized and classified items exclude loans and securities in trading
books, and the amount recoverable from the U.S
graded ‘‘Special
Mention’’ or worse and include retail items under Uniform Retail
Classification Guidelines, securities, funded and unfunded loans,
other real estate owned (ORE), other assets, and marked-to-mar-
ket counterparty positions, less credit valuation adjustments. Criti-
cized and classified items exclude loans and securities in trading
books, and the amount recoverable from the U.S. government, its
agencies, or government-sponsored enterprises, under guarantee
or insurance provisions.
No Exclusion.
(2) Underperforming Assets/Tier 1
Capital and Reserves.
Sum of loans that are 30 days or more past due and still accruing in-
terest, nonaccrual loans, restructured loans (including restructured
1—4 family loans), and ORE, excluding the maximum amount re-
coverable from the U.S. government, its agencies, or government-
sponsored enterprises, under guarantee or insurance provisions,
divided by a sum of Tier 1 capital and reserves.
No Exclusion.
Core Deposits/Total Liabilities ........
Total domestic deposits excluding brokered deposits and uninsured
non-brokered time deposits divided by total liabilities.
Exclude from total liabilities bor-
rowings from Federal Reserve
Banks under the PPPLF with a
maturity of one year or less and
borrowings from the Federal Re-
serve Banks under the PPPLF
with a maturity of greater than
one year, outstanding at end of
quarter.
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otal liabilities.
Exclude from total liabilities bor-
rowings from Federal Reserve
Banks under the PPPLF with a
maturity of one year or less and
borrowings from the Federal Re-
serve Banks under the PPPLF
with a maturity of greater than
one year, outstanding at end of
quarter.
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30662
Federal Register / Vol. 85, No. 98 / Wednesday, May 20, 2020 / Proposed Rules
TABLE E.2—EXCLUSIONS FROM CERTAIN RISK MEASURES USED TO CALCULATE THE ASSESSMENT RATE FOR LARGE OR
HIGHLY COMPLEX INSTITUTIONS—Continued
Scorecard measures 1
Description
Exclusions
Balance Sheet Liquidity Ratio .........
Sum of cash and balances due from depository institutions, federal
funds sold and securities purchased under agreements to resell,
and the market value of available for sale and held to maturity
agency securities (excludes agency mortgage-backed securities
but includes all other agency securities issued by the U.S. Treas-
ury, U.S. government agencies, and U.S. government sponsored
enterprises) divided by the sum of federal funds purchased and re-
purchase agreements, other borrowings (including FHLB) with a re-
maining maturity of one year or less, 5 percent of insured domestic
deposits, and 10 percent of uninsured domestic and foreign depos-
its.
Include in highly liquid assets the
outstanding balance of PPP
loans that exceed borrowings
from the Federal Reserve Banks
under the PPPLF at end of
quarter. Exclude from other bor-
rowings with a remaining matu-
rity of one year or less the bal-
ance of borrowings from the
Federal Reserve Banks under
the PPPLF with a remaining ma-
turity of one year or less out-
standing at end of quarter.
Potential
Losses/Total
Domestic
Deposits (Loss Severity Meas-
ure).
Potential losses to the DIF in the event of failure divided by total do-
mestic deposits. Paragraph [A] of this section describes the cal-
culation of the loss severity measure in detail
borrowings from the
Federal Reserve Banks under
the PPPLF with a remaining ma-
turity of one year or less out-
standing at end of quarter.
Potential
Losses/Total
Domestic
Deposits (Loss Severity Meas-
ure).
Potential losses to the DIF in the event of failure divided by total do-
mestic deposits. Paragraph [A] of this section describes the cal-
culation of the loss severity measure in detail.
Exclusions are described in para-
graph (A) of this section.
Market Risk Mea

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL20056. Check the current official text before relying on it. Not legal advice.