On April 9, 2020, the Federal Reserve Board issued an immediately effective, interim final rule updating banking regulations to neutralize the regulatory capital effects of participating in the Paycheck Protection Program Lending Facility (PPPL Facility). The goal of the new rule is to ease concerns held by many banks that participation in the PPPL Facility would impact their risk-based and leverage capital requirements by increasing regulatory capital requirements. A 30-day window for comments on the regulation opened yesterday, April 9, 2020.

In short, the regulation applies a 0% risk weight to the portion of exposure that is guaranteed by the government for purposes of determining risk-based capital requirements.