Today, May 5, 2020, the federal banking agencies released an interim final rule to neutralize the effect of participating in the Paycheck Protection Program Liquidity Facility (“PPPLF”) and Money Market Liquidity Facility (“MMLF”) on a banking organization’s Liquidity Coverage Ratio (“LCR”).

Absent relief, a banking organization’s repayments of advances of PPPLF and MMLF loans would be treated as LCR outflows, and receipt of payments on underlying PPPLF and MMLF collateral would be treated as LCR inflows.  Different outflow and inflow rates assigned to each leg of the transaction, as well as maturity mismatch add-ons, could have the effect of reducing the banking organization’s LCR.  The interim final rule addresses this issue by excluding from a banking organization’s LCR calculation any outflow and inflow amounts related to the PPPLF, MMLF, and assets securing funding from such facilities.  The relief does not apply to the extent the banking organization or a consolidated subsidiary issued the securities, debt obligations, or other instruments serving as collateral.

The interim final rule will be published in the Federal Register on May 6, 2020, and the agencies will accept comments on the interim final rule through June 5, 2020.

Photo of Randy Benjenk Randy Benjenk

Randy Benjenk is a partner in Covington’s industry-leading Financial Services Group and focuses his practice on regulatory advice and advocacy. He represents domestic and foreign banks, fintech companies, and trade associations on compliance issues, corporate transactions, and public policy matters.

Chambers USA says…

Randy Benjenk is a partner in Covington’s industry-leading Financial Services Group and focuses his practice on regulatory advice and advocacy. He represents domestic and foreign banks, fintech companies, and trade associations on compliance issues, corporate transactions, and public policy matters.

Chambers USA says Randy has received “widespread praise” from clients, who describe him as “excellent” and say that “the quality of his legal work and his writing abilities were incredible” and “he’s very easy to work with, knowledgeable and efficient.”

Randy regularly advises clients on a wide range of regulatory matters, including:

  • Bank Activities and Prudential Regulation. Complex bank activities, structure, licensing, and prudential matters, often involving issues of first impression at the federal and state banking agencies.
  • Corporate Transactions. Mergers and acquisitions, spinoffs, charter conversions, debt and equity issuances, investments, strategic partnerships, de novo bank formations, and related regulatory applications and disclosures.
  • Private Equity Investments. Private equity investments in banks, bank investments in private funds, and fund structuring related to the Volcker Rule and Bank Holding Company Act.
  • Public Policy Matters. Regulatory and legislative policy matters, with an emphasis on changes arising out of U.S. banking legislation and international standards.
  • Crisis Response. Navigating extraordinary events, such as the COVID-19 pandemic and related governmental responses, and firm-specific matters.
  • Supervisory and Enforcement Matters. Compliance and safety and soundness issues that arise in the examination and enforcement contexts.
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