From Rose Oswald Poels, as of March 23 at 6 p.m.

In an effort to keep you fully updated as events unfold, I have a few critical pieces of information to share with bank members tonight. 

Banks as Essential Services

I am confident that the banking industry will be included in the list of essential services, like it currently is in the existing emergency orders, in the Stay-at-Home order the Governor will be announcing tomorrow. As I understand it, the Governor will likely follow the path of what Ohio’s Governor did to create his order which will include a reference to the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) guidance as to the 16 categories of “Essential Critical Infrastructure Workers during the COVID-19 Response.” In the CISA document, “financial services” is a category, and it describes the workers as follows:

  • Workers who are needed to process and maintain systems for processing financial transactions and services (e.g. payment, clearing, and settlement; wholesale funding; insurance services; and capital markets activities)
  • Workers who are needed to provide consumer access to banking and lending services, including ATMs, and to move currency and payments (e.g., armored cash carriers)
  • Workers who support financial operations, such as those staffing data and security operations centers.

Banks should work with this broad definition to identify exactly who among their staff fit under this category and consider them individuals who should report to work. Then, for those individuals, you should do the following:

  • While Governor Evers’ order is not expected to require certification to travel outside of your home, many other jurisdictions around the country are suggesting the following as a best practice. Banks should obviously make their own decision as to how to handle this matter. First, on your bank’s letterhead, dated, and signed by the President or CEO of the bank, write a letter similar to the following (NOTE: WBA may update this language based on the actual language in Governor Evers’ order once it is public on Tuesday, March 24): 

To Whom It May Concern:
[Full Legal Name of Employee] works at [Name of Bank] performing an essential service as outlined in the U.S. Department of Homeland Security Cybersecurity and Infrastructure Security Agency’s (CISA) document under the “Financial Services” category. The definition of “essential businesses” in Governor Evers’ Stay-at-Home order includes a reference to the CISA List [NOTE: As of this writing, we don’t know the exact language in the order so this is subject to change] and Financial Services workers. 

In addition, the attached memo from U.S. Treasury Secretary Mnuchin further clarifies the critical role financial service providers perform during this state of emergency. 

As a result, [Full Legal Name of Employee] is needed at our Bank to perform these critical services for our customers and, therefore, is permitted to travel to/from our Bank to perform such services. 

Bank President or CEO

  • Second, staple the Treasury Secretary’s memo (which can be found HERE) to the above-described letter and give original copies to all covered employees.
  • Third, if your bank issues employees picture IDs to work at the bank, all covered employees should carry those on their person at all times. If not, all covered employees should carry business cards with their name and your bank’s name on their person at all times. 
  • Finally, all employees should have a state-issued form of identification on their person at all times.

Pending Federal Legislation

As most of you know, the Senate today failed again to advance important legislation to help with the Coronavirus pandemic which included important language to help banks and their customers. Despite this, rest assured that negotiations are still in fact occurring and while I don’t know for sure, it is possible we could have legislation moving forward as early as tomorrow. Once the negotiations have been complete, the legislation is expected to move fast through the Senate, then the House and on to the President’s desk. I want bankers to be as prepared as possible for what is expected in the legislation (note that this is the draft as of today and subject to change in final bill). Below are a few of the important highlights as it relates to the banking industry (albeit it is not an exhaustive list):

  • It is expected that the legislation will give broad authority to FDIC to enact some form of enhanced deposit insurance protection. This could take various forms; however, what is most often mentioned is the re-establishment of the Transaction Account Guarantee Program which was useful in 2008 to help calm fears of consumers. Whichever tool FDIC chooses to use, it will have a sunset date of December 31, 2020. 
  • The Community Bank Leverage Ratio will be set to 8%. Any bank that falls below that threshold will have a reasonable grace period to satisfy the CBLR. This will be issued in the form of an interim final rule which will not be permanent – it will have a sunset date of the earlier of the termination of the public health emergency as declared by the U.S. Secretary of Health and Human Services or December 31, 2020. As of now, I do not see any clarification on what a “reasonable grace period” is. 
  • TDRs – Beginning March 1, 2020 and ending 60 days after the termination of the public health emergency, a financial institution may:
    • Suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring; and 
    • suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes. 

Any suspension under (A) shall be applicable for the term of the loan modification, but solely with respect to any modification, including a forbearance arrangement, an interest rate modification, a repayment plan, and any other similar arrangement that defers or delays the payment of principal or interest, that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019; and shall not apply to any adverse impact on the credit of a borrower that is not related to COVID-19 pandemic. 

  • SBA 7(a) program changes – It is expected that an allocation of nearly $350 billion will be made to get money to affected businesses through the banking industry (and possibly others including Fintechs) by making changes to the 7(a) program between now and June 30. While the details won’t be final until the law is passed, it is expected to have a 100% guarantee by SBA; no collateral requirement and no personal guaranty needed; no upfront fee or servicing fee; usual 7(a) interest rates will apply; certain monies will be forgiven if used for specific purposes identified in the law related to COVID-19 pandemic. If you are not an SBA lender with delegated authority, there will be a streamlined process to sign up to become one. This money will be disbursed to businesses through SBA lenders with delegated authority on a first come-first serve basis as I understand it and when the money is gone, it is gone. 

As a result, it is critical for you to become an SBA approved lender if you are not already if you want to help your business customers get access to money through this program. It is also critical to plan now with your borrowers to get these applications in as soon as possible once the law is signed. SBA is expected to release guidance within 48 hours of the law becoming final if not earlier, and lenders are expected, especially banks, to agree to provide the money to affected businesses within 48 hours of receiving SBA approval. There will be a processing fee paid to lenders to make these loans, but it is unclear whether any servicing fees will be provided. 

This situation remains very fluid. WBA will continue to update you throughout the next several days as more developments unfold.