COVID-19 Update: The Paycheck Protection Program And The Secondary Market

Last week, the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the "Banking Agencies") adopted two measures to facilitate aid to small business employees under the CARES Act.  First, the Federal Reserve announced the formation of the Paycheck Protection Program Loan Facility (the "PPPLF"), a program established under Section 13(3) of the Federal Reserve Act which enables insured depository institutions to obtain financing from the Federal Reserve Banks collateralized by Paycheck Protection Program ("PPP") loans.  The Federal Reserve's announcement stated that the PPPLF would later be expanded to include PPP financing for loans held by nonbank lenders.¹  Second, the Banking Agencies announced that PPP loans held by banking organizations are assigned a zero-percent risk-weight for purposes of U.S. risk-based capital requirements,