A new US House of Representatives bill would exempt PPP loans from small banks’ asset totals

• A new bill in the US House of Representatives would exclude PPP loans issued by smaller banks from those banks’ asset totals, shielding them from increased regulatory oversight.
• And eliminating a potential deterrent to their participation in future stimulus measures.
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Under the legislation, when regulators calculate the asset totals of banks and credit unions with less than $15 billion in assets, Paycheck Protection Programs (PPP) loans would not be counted, American Banker reports. This would shield small financial institutions (FIs) from additional regulatory requirements that banks with more than $10 billion have to deal with under the Dodd-Frank Act.

BII

If the bill becomes law, it could free up smaller FIs to continue participating in future government stimulus measures as the coronavirus pandemic drags on. If banks are concerned that relief lending would result in onerous, unmanageable regulatory obligations, they may not be willing to continue lending in the future.

That would significantly dent the government’s effectiveness in distributing relief funds: 5,338 lenders with less than $10 billion in assets were responsible for a total of $233.78 billion in PPP loans, or 45% of the program’s total, per Small Business Administration data from the program’s close in early August.

Exempting these banks from the added regulatory burden would eliminate the potential obstacle, and ensure that small FIs can play a part in any future stimulus measures, which are currently under discussion.

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