US lawmakers have enacted a $2 trillion stimulus package for the economy that will provide additional support to small businesses and consumers during the COVID-19 coronavirus pandemic.
President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on Friday after it was swiftly passed by the Senate and the House of Representatives.
The Act contains a number of provisions that were lobbied for by the American Bankers Association (ABA), including government guarantees for loans made to finance payrolls, as well as waiving some requirements linked to economic injury disaster loans.
The ABA said the new laws would “help ensure banks have additional tools to help their customers and communities, and the nation’s economy, through the crisis”.
The association successfully lobbied for a delay to the implementation of the Current Expected Credit Loss accounting approach, which requires banks to take into account forecasts for the life of loan contracts rather than just the next financial year or period. This provision will now come into force after the national emergency has ended or December 31, 2020, whichever is earlier.
The bill’s provisions also include temporary relief from troubled debt restructurings, effective from March 1, 2020 and extending for 60 days after the end of the COVID-19 national emergency. This will allow banks to suspend any adjustments they might otherwise have had to make to their loan books when reporting their balance sheets.
The CARES Act also lowers the leverage ratio for community banks from 9% to 8%, and waives national bank lending limits “until the end of the national emergency or December 31, 2020, whichever comes first”.
It also modifies the Dodd-Frank Act to give the Federal Deposit Insurance Corporation the power set up a “temporary program” to guarantee bank debt.
In addition, the government has provided the Treasury Department with $500 billion to provide “collateralized loans, loan guarantees and other investments” to eligible entities.
ABA president and CEO Rob Nichols said: “America’s banks are already taking steps to assist customers and businesses affected by COVID-19, and this legislation will allow banks to provide even more critical assistance to borrowers in their communities.
“Banks of all sizes stand ready to do their part to support the economy and put the nation on a quick path to recovery.”
Comptroller of the Currency Joseph Otting praised the passing of the “important legislation that will provide much needed support and clarity to the participants of the federal banking system and relief for the nation in response to the COVID-19 national emergency”.
“Several provisions of the law will enable national banks and federal savings associations to assist the customers, businesses, and communities who rely on them to emerge from this public health emergency as financially strong as possible, and to contribute to the country’s economic recovery,” Otting said.
The Oregon Bankers Association (OBA) said the changes made to small business loans would help inject $350 billion into small companies across the US, including non-profits and independent contractors.
The OBA stated: “While we have to wait for the programs to become operational, we expect that to be soon and are encouraging the [Small Business Administration] and Treasury to act swiftly. In the meantime, Oregon businesses can prepare by assembling their financial information so they are ready to go when they approach a participating bank.”
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