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Programs to help financial institutions with short-term liquidity needs

Apr 28, 2020

From the initial stages of the COVID-19 crisis, the federal government has been more than responsive in ensuring ample liquidity in the banking system with unprecedented access to funds and relaxation of certain rules that may serve to restrict liquidity.

Some of the programs designed to help with short-term liquidity needs solve immediate concerns, while others are not as well-known and may provide more subtle relief.

Here is a summary of sources of liquidity you may want to consider:

Paycheck Protection Program liquidity facility

On April 9 the Federal Reserve announced a program to make loans to depository institutions on a non-recourse basis taking Paycheck Protection Program loans as collateral. On April 23 the Federal Reserve expanded the program to include non-depository lenders including community development financial institutions.

Encouraging use of the discount window

On March 15, the Federal Reserve announced it would encourage the use of the discount window by lowering the primary credit rate 150 basis points. Typically, the discount winder is used to provide an emergency source of funding.

The Federal Home Loan Bank of Chicago COVID-19 relief programs

On April 20, the Federal Home Loan Bank of Chicago approved $30 million in COVID-19 Relief programs consisting of zero-rate advances and grants for all member institutions. While the link below is for the Chicago FHLB other FHLBanks have tailored programs to service their regional needs. Check with your local FHLBank.

Eligible Collateral on FHLBank advances

On April 23, the Federal Housing Finance Agency announced that FHLBanks can accept Small Business Administration PPP loans as collateral from its members.

Servicer Responsibility to forward payments on loans in forbearance

On April 21 the Federal Housing Finance Agency addressed liquidity concerns of mortgage servicers by imposing a four-month servicer advance obligation limit for loans in forbearance.

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Karen A. Mitchell
Senior Manager, Risk Advisory Services
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