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.