Frequently Asked Questions

There are multiple ways that depository institutions can monitor the value of their pledged collateral on an ongoing basis:

• For depository institutions enrolled in Discount Window Direct (DWD), collateral value is shown as "Discount Window Total Collatera"
• Depository institutions that pledge collateral can request from their local Reserve Bank to periodically receive a Statement of Collateral Holdings via secure email which details collateral values; or
• Collateral value can be viewed on Account Management Information (AMI) in the "View Collateral Balances" tab under the "Collateral Reports" section.

A minimal risk rating is typically equivalent to investment grade, while a normal risk rating is typically equivalent to below investment grade. The minimal/normal risk distinction is available for non-consumer loans. A depository institution can contact its local Reserve Bank to discuss how the minimal/normal risk ratings are applied to its pledged loans.

The Loan Collateral Schedule section of the Pledging Collateral page contains information related to preparing and transmitting collateral schedules, such as the necessary data fields and their corresponding definitions, the required format and approved transmission methods. If a depository institution has any questions regarding this information, it can contact its local Reserve Bank.

Missing information in required loan fields will result in a pledged loan automatically receiving zero collateral value. This occurs when information is missing for Balance, Interest Rate, Maturity Date, Internal Risk Rating, FX/FL Flag, Interest Rate Spread, Credit Bureau Score Current (credit cards only) and APR (credit cards only). The listed required fields are non-exclusive and may be expanded at the discretion of the Reserve Banks. Contact your local Reserve Bank for further information on missing loan fields.

The Reserve Banks utilizes the same model to derive values for all pledged loans. Out-of-scope depository institutions will receive collateral value based on the loan data fields they report to the Reserve Banks. For the additional loan fields that are not reported, the Reserve Banks rely on data provided by in-scope institutions.

Yes. Reserve Banks accept pledges of subprime mortgages and other subprime consumer debt that is performing and meets the eligibility criteria stated on the Collateral Eligibility page. This also includes debt obligations containing subprime mortgages if they meet Reserve Bank eligibility requirements, including credit quality and tranche type. AAA-rated collateralized debt and mortgage obligations are examples of acceptable structured debt obligations.

Yes. Loans with electronic signatures in lieu of “wet ink” signatures may be pledged as collateral, subject to Reserve Bank standards. Contact your local Reserve Bank for further information.

Yes. Loans that are signed on paper and then imaged and electronically stored with the original paper copy destroyed may be pledged as collateral. Some restrictions may apply based on the applicable law(s). Contact your local Reserve Bank for further information.

A modification of a pledged loan is deemed to be a new origination unless the modification of the loan terms is contemplated in the original loan documents such as, a change in the interest rate upon a certain event. A modification may include, but is not limited to, changes to the following loan data elements: collateral type, interest rate, maturity date, origination date, original balance/commitment. In general, modifications will require the pledging depository institution to report updated values for all relevant loan data elements as of the modification date (e.g. the modification date would be the new Origination Date). Please review the In-scope File Format Specifications and Definitions document for information on how to report new originations on a collateral schedule or contact your local Reserve Bank for additional details.

With respect to loans that have been modified, modifications that contain imaged or electronically created signatures (rather than "wet ink" signatures) may be eligible to be pledged. Contact your local Reserve Bank for further information. 

Yes. Loans guaranteed by the SBA may be pledged as collateral, as described in the Collateral Eligibility page.

There are no restrictions on the use of funds borrowed under the primary credit program.

There are restrictions on the use of funds borrowed under the secondary credit program. Secondary credit is available to meet backup liquidity needs when its use is consistent with a timely return by the depository institution to a reliance on market sources of funding or the orderly resolution of a troubled institution. Secondary credit may not be used to fund an expansion of the depository institution's assets.

Seasonal credit is not permitted to be used to increase sales of federal funds or to purchase other assets. However, net sales of federal funds are appropriate, as long as they are consistent with the depository institution's normal operating pattern. The maximum levels of net fed funds sales and investments allowed while borrowing under the program are established during the qualification process.

Primary credit is limited to depository institutions that are in generally sound financial condition as determined by the Reserve Bank. Reserve Banks determine eligibility on an ongoing basis generally using supervisory ratings and capitalization data, as well as other factors and sources of information. Depository institutions that do not qualify for primary credit may be eligible for secondary credit. Depository institutions' eligibility for primary credit and secondary credit is reassessed as new information about their condition becomes available.

Depository institutions that have executed and submitted the OC-10 agreements with the Reserve Bank will be notified promptly if their eligibility changes.

Yes, on a delayed basis. The Board of Governors is required by law to publicly disclose the following information about primary, secondary and seasonal credit advances, generally about two years after a discount window advance is extended to a borrower:

o The name and identifying details of the depository institution.
o The amount borrowed by the depository institution.
o The interest rate paid by the depository institution; and
o Information identifying the types and amounts of collateral pledged in connection with any discount window advance. This disclosure requirement does not apply to collateral pledged by depository institutions that do not borrow.
This information is released quarterly. 

The Federal Reserve may be required to publicly disclose information about borrowers of emergency credit facilities more frequently.

No. The Federal Reserve does not publish information regarding depository institutions' current eligibility for primary, secondary, or seasonal credit. Federal law requires the Federal Reserve to publicly disclose, on a delayed-basis, information on discount window advances including the interest rate paid on the advances made by Reserve Banks.

The Federal Reserve does not routinely share information about institutions' borrowing activities with bank regulators. If requested, the Federal Reserve Banks will provide each regulator a list showing the depository institutions supervised by that regulator that have executed borrowing agreements with a Reserve Bank and identify which depository institutions have pledged collateral. Bank regulators may obtain information about a depository institution's borrowing activities in connection with a potential supervisory problem.

Proceeds of approved discount window advances are normally made available at the close of Fedwire Funds Service and FedNow Service (usually 7:00 pm EST) on the day the advance is requested and processed by the Reserve Bank. 

The repayment of advances will be posted on the maturity date of the advance or may be posted earlier if a depository institution requests to make an early payment. Repayments generally post at the same time of day the funds were made available to the depository institution at origination.

Yes.  Depository institutions may prepay all or a portion of the principal of discount window advances prior to maturity with no prepayment fees or penalties.  To prepay an advance, depository institutions can submit a request through Discount Window Direct (DWD), or an authorized individual can call the depository institution’s local Reserve Bank.

Yes. If a depository institution qualifies for seasonal credit advances, it can choose to utilize the seasonal credit program rather than the primary credit program.

The amount of interest charged on advances is the applicable rate in effect at the time the advance is made. If the applicable rate changes while an advance is outstanding, the new rate will apply to the unpaid balance on and after the effective date of the change.
 
Interest on advances is due and payable at maturity, or when full or partial repayment of principal on the advance is requested. At maturity or repayment, the remaining principal and accrued interest will be automatically charged to the depository institution's Reserve Bank account or the designated correspondent's Reserve Bank account.

If a depository institution fails to meet any collateralization requirement while advances are outstanding, it will need to either pledge additional collateral to cover the shortfall or pay down some or all of the outstanding advances.

As announced on March 15, 2020, the Reserve Banks have waived their rights to require repayment on demand for a term primary credit loan with a remaining maturity of more than 30 calendar days, as provided in section 5.1(a) of OC-10.  The Reserve Banks retain all other remedies under OC 10, including but not limited to calls to cure collateral deficiencies and remedies upon the occurrence of an event of default, such as accelerating the loan should the depository institution cease to qualify for primary credit or become insolvent. Additional information is available in the 'Notice of Availability of Term Advances and Applicable Terms ("Terms")' document.

A depository institution’s net debit cap refers to the maximum amount of uncollateralized daylight overdrafts that it may incur in its Reserve Bank account in compliance with the Federal Reserve Policy on Payment System Risk (PSR policy). Each institution that has a Reserve Bank account is assigned a net debit cap. An institution that maintains a positive net debit cap has the option to apply for a higher net debit cap category. The sample resolutions for each cap type are located in the Model Resolutions 1-3 of Appendix B of the PSR Guide. Completed resolutions should be sent to the institution’s local Reserve Bank.

Depository institutions may not incur daylight overdrafts above the amount of their net debit cap. The Overview and Guide to the PSR Policy explain how net debit caps are calculated. 

A daylight overdraft occurs when a depository institution's Reserve Bank account has a negative balance at any point during the business day. Daylight overdrafts, also referred to as intraday credit, are governed by part II of the Federal Reserve Policy on Payment System Risk (PSR policy). See the Overview of the Federal Reserve's Payment System Risk Policy and Guide to the Federal Reserve's Payment System Risk Policy for additional information.

The Reserve Banks use a schedule of posting rules, identified in the PSR policy, to determine whether a daylight overdraft has occurred in a depository institution’s Reserve Bank account and if that overdraft constitutes a violation of the PSR policy. The daylight overdraft posting rules define the time of day that debits and credits for transactions processed by the Reserve Banks will post to a depository institution's Reserve Bank account. The Reserve Banks measure a depository institution’s daylight overdraft activity, monitor its compliance with the PSR policy, and calculate daylight overdraft charges on an ex-post basis.

Depository institutions with regular access to the discount window may incur daylight overdrafts. Depository institutions that do not have regular access to the Discount Window are not permitted to incur daylight overdrafts. The Reserve Bank may also limit access to intraday credit for any depository institutions that present increased risks, such as depository institutions in weak financial condition or depository institutions incurring overdrafts in violation of the PSR policy.

Each depository institution incurring uncollateralized daylight overdrafts in its Reserve Bank account  must adopt a net debit cap ("cap"), which limits the total uncollateralized daylight overdrafts that it may incur during any given day.  A depository institution's cap category and its capital measure determine the dollar amount of its net debit cap. In addition to their net debit cap, depository institutions may be eligible to obtain additional collateralized daylight overdraft capacity. The resulting combination of uncollateralized and collateralized capacity is known as the maximum daylight overdraft capacity or “max cap.”

No. Under the Federal Reserve Policy on Payment System Risk (PSR policy), collateralization of daylight overdrafts by healthy depository institutions is voluntary.  Any collateral that a depository institution has pledged to its Reserve Bank that is not securing an advance or other obligation, such as a discount window loan, will automatically be applied to offset the depository institution's daylight overdraft fees.

The Reserve Banks calculate and assess daylight overdraft charges on the basis of a two-week maintenance period as follows:
• A zero fee applies to collateralized daylight overdrafts for depository institutions with access to the Discount Window.
• A 50-basis point (annual rate) fee applies to uncollateralized daylight overdrafts for depository institutions with access to the Discount Window, A fee waiver of $150 is subtracted from the gross fees of such depository institutions.
• A 150-basis point (annual rate) penalty fee (at a minimum of $25) is assessed for daylight overdrafts incurred by depository institutions that do not have access to the Discount Window.
For more information on how the Federal Reserve calculates daylight overdraft fees, see the Overview of the Federal Reserve's Payment System Risk Policy or the Guide to the Federal Reserve's Payment System Risk Policy.

The Federal Reserve expects depository institutions that maintain Reserve Bank accounts to monitor their account balances on an intraday basis in order to comply with the Federal Reserve Policy on Payment System Risk (PSR policy). Depository institutions should be aware of the payments made from their accounts each day and sufficiently fund them. Depository institutions are expected to use their own systems and procedures, as well as the Federal Reserve's systems, to monitor their account balance and payment activity. Depository institutions are also expected to maintain procedures to manage their accounts in contingency situations and during periods of service disruptions. Daylight overdrafts that result in overnight overdrafts are strongly discouraged and subject to an overnight overdraft penalty fee outlined in part III of the Federal Reserve Policy on Payment System Risk (PSR policy).

No.  No new extensions of credit under the PPPLF have been made or will be made after the facility’s termination date of July 30, 2021. (Added 8/3/2021)

PPPLF participants should track all of their PPPLF advances and associated pledge pools of PPP loans separately and be prepared to report the updated aggregate current outstanding balance of the PPP loans in each pledge pool (reflecting payments on the PPP loans received from all sources).  PPPLF participants should also be prepared to generate listings of original and updated information on individual pledged PPP loans.

Yes, a PPPLF participant must submit a Paycheck Protection Program Liquidity Facility (PPPLF) Individual PPP Loan Reduction Report (reduction report) indicating the receipt of any payments on PPP loans pledged as collateral to the PPPLF immediately upon receipt of payment and must immediately remit the amount of paydowns received to the lending Reserve Bank. In addition, a PPPLF participant must begin submitting reduction reports every two weeks once the participant has received its first forgiveness reimbursement payment from the SBA as described below.

The first regular periodic reduction report is due when the PPPLF participant begins receiving forgiveness reimbursement payments from the SBA for, and begins forgiveness paydowns on, PPP loans pledged to the PPPLF. Thereafter, the PPPLF participant must submit reduction reports at least once every two weeks (or more frequently, if requested by the lending Reserve Bank) on any PPP loan pool containing a PPP loan for which the PPPLF participant has received a PPP loan paydown from any source.  If the PPPLF participant has not received a PPP loan paydown on any PPP loan in a given PPP loan pool during the reporting period, then the PPPLF participant is not required to submit a PPP loan reduction report for that pool.  If no PPP loan paydown amounts are received during a reporting period on any of the PPPLF participant’s PPP loan pools, the participant must notify the Reserve Bank by email that no PPP loan paydown amounts were received during the reporting period. (Updated 8/3/2021)

A PPPLF participant reports PPP loan paydowns that it has received by submitting a Paycheck Protection Program Liquidity Facility (PPPLF) Individual PPP Loan Reduction Report (reduction report). Effective September 18, 2020, the single reduction report form replaces the two forms (Transmittal Form for Reporting Reductions of Outstanding Principal Balance of Small Business Administration Paycheck Protection Program Loans Pledged to Secure Paycheck Protection Program Liquidity Facility Advances and the Paycheck Protection Program Individual Loan Listing Table) that were used starting in May 2020.  The reduction report is used to submit the updated outstanding balance of individual PPP loans that are pledged as collateral to the PPPLF upon which payments have been received. The reduction report and additional instructions for submitting the reduction reports are available on the PPPLF website. (Added 9/16/2020)

No, a PPPLF participant is not required to prepare and submit a reduction report on a particular PPPLF advance if the PPPLF participant has not received any PPP loan paydowns on PPP loans pledged to secure that advance during the reporting period.  If the PPPLF participant has not received any PPP loan paydown amounts on any of its pledged PPP loan pools during the reporting period, the participant must send an email notifying the Reserve Bank that no PPP loan paydown amounts were received.  (Added 9/16/2020)

No.  The revalued pledge pool must include only those PPP loans that were included in the original pledge, less any that have been withdrawn or fully paid off.  Substitution of PPP loans that were not originally pledged is not permitted.

Yes. Voluntary prepayments must be accompanied by withdrawals of PPPLF collateral pledged to secure the PPPLF extension of credit.  The amount of the prepayment must correspond to the total balance of the withdrawn PPP loans that have been pledged as PPPLF collateral.  Accrued interest will be charged at prepayment, based on the amount of prepayment.

No.

Yes. A participant’s lending Reserve Bank offers a “Lending Statement for PPPLF Participants” (Lending Statement) upon request. The Lending Statement provides information on the participant’s aggregate PPPLF advance activity (such as number of advances outstanding, total and outstanding advance amounts, accrued unpaid interest, and paid interest amounts) and aggregate PPPLF activity that has been paid down (such as paid principal amount). In addition, the Lending Statement includes this same information for each of the participant’s individual PPPLF advances.  

To request a Lending Statement, an authorized individual must email its lending Reserve Bank’s PPPLF mailbox with an email containing “request for lending statement” in the subject line. An authorized individual is a person identified in the PPPLF Letter of Agreement as authorized to request PPPLF extensions of credit and pledge PPPLF collateral. An email requesting a Lending Statement may not include other PPPLF-related issues. For example, an email requesting a Lending Statement may not also contain a PPPLF pledge or reduction transaction. A participant may request a Lending Statement from its lending Reserve Bank not more frequently than once per calendar month.  (Added 5/19/2021)

Interest on a PPPLF advance accrues daily beginning when the PPPLF advance is credited to the PPPLF participant’s designated account at a Reserve Bank.  Interest accrues daily until the PPPLF advance is fully repaid.  PPPLF participants must pay all accrued and unpaid interest at the time of payoff.  In addition, a PPPLF participant must accompany any prepayments of any part of a PPPLF advance with payment of accrued and unpaid interest attributable to the amount of the prepayment.  The prepayments (including payment of the accompanying accrued and unpaid interest) will be processed when the PPPLF participant reports a change to the Reserve Bank in the balance of the PPP loans pledged to secure the PPPLF advance.   

Interest on a PPPLF advance will continue to accrue during any lag between the time that the PPPLF participant receives a payment on a PPP loan securing a PPPLF advance and the time that the PPPLF participant reports that payment to the Reserve Bank.

Interest on PPPLF advances accrues daily from the day the advance is extended.  Daily interest accruals are calculated on the basis of 365 days in a year, and are rounded to whole cents.  Interest does not compound, and accrues based only on the outstanding principal balance.  For example, the daily accrued interest on a PPPLF advance of $1 million is: round($ 1,000,000 * (.0035 / 365),2)*1 = $ 9.59.  (Added 5/20/2020)

If a PPP loan that has been pledged to the PPPLF does not meet the requirements of the PPP or PPPLF, is cancelled, is awaiting SBA reinstatement, or is otherwise not guaranteed by the loan must be removed from the collateral pledge and the PPPLF advance secured by that PPP loan becomes a recourse obligation.  The PPPLF participant should immediately notify its lending Reserve Bank of the non-compliant PPP loan, and may choose to withdraw the loan from the collateral pledge and pay down the PPPLF advance to the extent of the withdrawn collateral (plus accrued interest).  Under the terms of the PPPLF, a PPPLF advance may only be secured by PPP loans that are guaranteed by the SBA and that satisfy all other conditions of the PPP and of the PPPLF (including the PPPLF Term Sheet and the PPPLF Letter of Agreement). 

The SBA determines whether a PPP loan satisfies the requirements of the PPP.  Questions regarding the status of PPP loans for purposes of the PPP, or questions regarding the cancellation of a loan or re-instating the SBA guarantee should be directed to the SBA.   (Updated 8/3/2021)

Yes.  A PPPLF participant is required to repay a PPPLF extension of credit when any of the following happens:

• The PPPLF participant has been reimbursed by the SBA for a loan forgiveness (to the extent of the forgiveness);

• The PPPLF participant has received payment from the SBA representing exercise of the loan guarantee; or

• The PPPLF participant has received payment from the PPP borrower of the underlying PPP loan (to the extent of the payment received).

PPPLF participants are required to repay PPPLF advances so that the outstanding amount of the PPPLF advance matches the updated aggregate collateral balance in the associated pledge pool.  The amount of a PPPLF advance outstanding must not exceed the aggregate amount of the outstanding balances of PPP loans pledged to secure the PPPLF advance. 

Any payments on pledged PPP loans (e.g., forgiveness or guarantee payments from the SBA, or payments from the PPP borrower) must be promptly reported to the lending Reserve Bank so that the PPPLF advance can be adjusted accordingly.  Additional information on reporting requirements for payments on PPP loans and on prepayment of PPPLF extensions of credit is available on the PPPLF website. (Updated 9/16/2020)

Generally, yes.  Absent an event of default, the Reserve Bank plans for each participant to repay its advance when it comes due, including on the maturity date.  Pursuant to Operating Circular 10, which is part of the PPPLF Letter of Agreement, a participant agrees that its lending Reserve Bank will debit the participant’s account for repayment of obligations when they become due.  If a participant decides to default on an advance, the Reserve Bank will not debit a participant’s account for repayment of an advance on the maturity date.  Participants that intend to default should contact their lending Reserve Banks as soon as possible.

Although the Reserve Bank will not debit a participant’s designated account for repayment of an advance in default, the Reserve Bank may debit a participant’s account for payments the participant has received on a PPP loan pledged to the facility at any time.  Pursuant to the Letter of Agreement, these payments are the property of the Reserve Bank, and the participant agrees to remit them to the Reserve Bank.  These payments include forgiveness and guarantee payments from the Small Business Administration and payments made on a PPP loan by the PPP loan borrower. (Added 4/8/2022)

No, the maturity of a PPPLF advance will not be extended to provide additional time for the participant to receive SBA payments.  The PPPLF Letter of Agreement requires that each advance be repaid in an aggregate amount equal to the advance plus accrued interest on the maturity date without regard to whether payment has been received on an underlying PPP loan.  Accordingly, any unpaid balance after the maturity date of an advance will be considered to be in default (Defaulted Advance).  The Reserve Bank will work with participants so that they may finish the process of receiving payments from the SBA and remitting those proceeds to the Reserve Bank once complete.

Participants that elect to default and are waiting for payments from the SBA will be required to provide evidence of their efforts to collect payments (including forgiveness or guarantee purchase payments, as applicable) from the SBA.  The participant also is required to continue servicing the PPP loans that collateralize the Defaulted Advance, as required by SBA rules.  SBA Procedural Notice 5000-812316 (July 15, 2021).  The participant will continue to be required to remit payments received on these PPP loans to the lending Reserve Bank, and the Reserve Bank may debit a participant’s account for payments the participant has received on a PPP loan pledged to the facility at any time.  See “Will the Reserve Bank debit my institution’s account for an outstanding balance on the maturity date of a PPPLF advance?” in these FAQs. (Added 4/8/2022)

No.  If a participant modifies the maturity of a PPP loan collateralizing a PPPLF advance such that the maturity date of the PPP loan no longer matches the maturity date of the PPPLF advance collateralized by that loan, then the PPPLF advance becomes recourse to the participant in the amount secured by that PPP loan.  In that case, the Reserve Bank is authorized to debit a participant’s account in an amount equal to the portion of the advance collateralized by any PPP loan whose maturity does not match the maturity of the PPPLF advance.  If the participant wishes to maintain the nonrecourse status of the PPPLF advance, the participant should consult with its lending Reserve Bank regarding any plans to modify the maturity date of a PPP loan that collateralizes a PPPLF advance. 

The Reserve Bank cannot modify the maturity dates of PPP loans pledged to secure PPPLF advances.  Modifying the maturity of PPP loans is governed by the requirements of the Small Business Administration.  (Added 6/17/2022)

No, a participant may not modify the maturity of a PPPLF advance after it matures.

A participant that is considering modifying the maturity of a PPPLF advance from two years to five years should do so before the advance matures.  For additional information regarding the process of modifying an advance from two years to five years, please consult the Guide for Pledging PPP Loans with Modified Maturities. (Added 6/17/2022)

A participant will be required to continue servicing the PPP loans that collateralize a Defaulted Advance.  The SBA requires PPP lenders to service their PPP loans “until they are fully forgiven or paid in full or, in the event of a default or other qualifying event, until SBA purchases the guaranty.”SBA Procedural Notice 5000-812316 (July 15, 2021).  The participant also will continue to be required to remit payments received on these PPP loans to the lending Reserve Bank.  The Reserve Bank may debit a participant’s designated account for payments the participant has received on a PPP loan pledged to the facility at any time.  See “Will the Reserve Bank debit my institution’s account for an outstanding balance on the maturity date of a PPPLF advance?” in these FAQs.

Interest will continue to accrue on the Defaulted Advance at 35 basis points.  The Federal Reserve also discloses certain information about PPPLF advances monthly on its public website regardless of whether the advance is current or in default.  These disclosures include the name of participants, amounts borrowed, value of pledged collateral, maturity dates, and other information.  (Added 4/8/2022)

PPP loans that are pledged as PPPLF collateral must be withdrawn from the PPPLF before they are sold, and the portion of the PPPLF advance secured by that loan must be repaid.  The PPPLF participant must both notify the lending Reserve Bank that it is requesting to prepay a PPPLF extension of credit, and must pay the lending Reserve Bank the full amount of the outstanding balance of the PPP loan that the PPPLF participant is able to withdraw that loan from its collateral pledge.  The PPPLF participant should contact its lending Reserve Bank for information on submitting its request and on completing any necessary documentation. ​(Updated 8/3/2021)

No.  Extensions of credit under the PPPLF were made without recourse to the PPPLF participant.  If, however, the PPPLF participant has breached any of the representations, warranties, or covenants in the PPPLF documentation; or has engaged in fraud or made a misrepresentation in connection with participation in the PPPLF, the PPPLF advance becomes a recourse obligation. (Updated 8/3/2021)

The Federal Reserve publicly discloses information regarding the PPPLF, including information regarding participants, amounts borrowed, value of pledged collateral, overall costs and revenues, and other information.  Please see the Board’s May 12, 2020 press release for further information on the disclosures. 

Balance sheet items related to the PPPLF, including PPPLF credit extended, are reported weekly on an aggregated basis on the Board’s H.4.1 statistical release, “Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks.” 

In addition, the Federal Reserve will disclose to Congress information as required by Section 13(3) of the Federal Reserve Act and the Board’s Regulation A. ​(Updated 8/3/2021)

The PPP Flexibility Act amends several provisions of the PPP under the CARES Act, including an extension of the maturity of a PPP loan and an extension of the forgiveness period.  Under the PPP Flexibility Act, the maturity of PPP loans made on or after June 5, 2020, is now five years instead of two.  A PPP lender and a PPP borrower also may mutually agree to extend the maturity of an existing PPP loan from two to five years. 

As described in the PPPLF term sheet, the maturity of an extension of credit under the PPPLF will equal the maturity of the PPP loan pledged to secure the extension of credit. Accordingly, PPPLF advances may have a 5-year maturity when secured by a pledge of PPP loans also with a 5-year maturity.

Additional instructions for reporting requirements for pledged PPP loans with modified maturities are available on the PPPLF website. (Updated 9/25/2020)

PPP loans pledged to the PPPLF are excluded from total leverage exposure, average total consolidated assets, advanced approaches total risk-weighted assets, and standardized total risk-weighted assets, as applicable.  On April 9, 2020, the Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued an interim final rule (“IFR”) to allow banking organizations to exclude from regulatory capital measures any exposures pledged as collateral for a non-recourse loan from the Federal Reserve.  Because PPPLF extensions of credit are non‑recourse, PPP loans pledged to the PPPLF qualify for exclusion under the IFR.

Consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), all PPP loans receive a zero percent risk weight for purposes of the Federal banking agencies’ risk-based capital rules.  However, only PPP loans that are pledged to secure PPPLF extensions of credit may be excluded from leverage ratio calculations.  PPP loans that are pledged to secure primary credit funding at the discount window will not be excluded from leverage ratio calculations.

If the PPPLF participant is a depository institution, a PPP loan that it has purchased from another PPP lender and pledged to the PPPLF as collateral may be excluded from total leverage exposure, average total consolidated assets, advanced approaches total risk-weighted assets, and standardized risk-weighted assets, for the institution and its holding company, as applicable. (Updated 8/3/2021)

On May 5, 2020, the federal banking agencies issued an interim final rule (Liquidity Coverage Ratio Rule: Treatment of Certain Emergency Facilities) to facilitate use of the PPPLF, and to ensure that the effects of its use are consistent and predictable under the LCR rule.  The interim final rule neutralizes the effects of the LCR rule for banking organizations participating in the PPPLF.  The interim final rule also makes conforming changes to the FR 2052a reporting form.

For depository institutions, questions regarding the PPPLF should be directed to the institution’s local Reserve Bank or to PPPLF@chi.frb.org.

For non-depository institutions, questions regarding the PPPLF should be directed as follows:  

To learn more about the PPP, visit https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses.