Banks Granted Capital Break for Small Business Loans Amid Crisis

The Federal Reserve on Thursday gave banks capital breaks to incentivize lending through the Paycheck Protection Program.  

Regulators won’t mandate that lenders maintain capital buffers as a protection, the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said in a statement. According to Bloomberg, the loans will be backed by a Fed lending facility and will “allow banking organizations to neutralize the regulatory capital effects of participating in the facility.”

About $350 billion in forgivable loans are available to small businesses as part of the $2.2 trillion stimulus package passed in March. Employers can use the funds to cover the costs of salaries, bonuses, retirement benefits, parental leave and health care benefits.

Currently, Congress is negotiating a second bill that could add $250 billion to the program.