The Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint interim final rule to support the Treasury Department’s Emergency Capital Investment Program (ECIP).
The ECIP will support the efforts of minority depository institutions (MDIs) and community development financial institutions (CDFIs) to provide loans, grants, and forbearance to small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities. To assist in the implementation of the ECIP, the Federal Reserve System, the FDIC, and the OCC have revised their capital rules to provide that the “Treasury’s investments under the program qualify as regulatory capital of insured depository institutions and holding companies.”
“Under the ECIP, the Treasury will provide up to $9 billion in capital directly to certain CDFIs and MDIs and is developing the program’s terms, regulations, and other materials,” the FDIC stated in a release. “In general, the Treasury may make capital investments in the form of senior preferred stock or subordinated debt for institutions that cannot issue senior preferred stock.”
The interim rule states the stock issued under the ECIP will qualify as additional tier one capital, and subordinated debt issued under the program will qualify as tier two capital.
The Treasury’s authority to make new capital investments will end six months after the COVID-19 pandemic national emergency has been terminated.
The interim rule will be effective as of the date it is published in the Federal Register. The agencies are also taking public comments on the rule, and those are due on or before 60 days after the publication date.