WASHINGTON — Two federal bank regulators — the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. — advised banks they regulate to take care of customers affected by the novel coronavirus, recommending that lenders consider waiving fees and allow for short-term flexibility in loan repayment.
In separate but overlapping bulletins, the FDIC and OCC said that banks with customers affected by COVID-19 would not be penalized by examiners for taking steps to mitigate financial losses in the coming months.
The bulletins outlined a series of measures the nation's banks could take to help cash-strapped customers, including waiving various fees, such as ATM or overdraft penalties. Both the OCC and FDIC also recommended that banks encourage greater access to cash for customers by increasing daily ATM withdrawal limits and “easing restrictions” on cashing checks from non-customers and those from out of state.
The OCC told banks that allowing loan payment flexibility for struggling customers had the potential to “ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate the bank’s ability to collect on its loans.”
The FDIC echoed the advice but put additional emphasis on the importance of flexibility for small businesses, writing in its bulletin that "these types of prudent arrangements for borrowers who operate small businesses can contribute to the well-being of local communities."
Both the FDIC and OCC reminded banks to proceed cautiously: Changes to any loan “should be based on the facts and circumstances of each borrower and the terms of the loan modification," the OCC wrote in its bullet.
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The FDIC told banks they must evaluate whether or not certain loans loans experiencing pandemic-related stress qualify as "troubled debt restructurings," or TDRs. "According to accounting standards, a modification triggers a TDR only if the institution grants a concession to the borrower which it would not otherwise grant because a borrower is experiencing financial difficulties," the FDIC wrote.
At the same time, both agencies sought to reassure banks that the steps they take in the coming months to address the developing pandemic and its impact on bank customers would be subject to some supervisory relief.
“The OCC supports and generally will not criticize efforts to accommodate customers in a safe and sound manner,” the bulletin said. “The OCC encourages banks to work with their supervisory office with respect to accommodations that may more effectively manage or mitigate adverse impacts due to COVID-19.”
The FDIC wrote that it would "work with affected financial institutions to reduce burden when scheduling examinations, including making greater use of off-site reviews, consistent with applicable legal and regulatory requirements."
For commonplace matters, like filing audited financial statements, the OCC and FDIC encouraged banks that believed they may struggle to meet regulatory requirements in the near future to contact their regulator to discuss potential flexibility.
“The OCC will work with banks that may experience problems fulfilling their reporting responsibilities, taking into account each bank’s particular circumstances,” the agency wrote.
Both agencies are anticipating the possibility of widespread bank branch closures, either from staffing shortages or to limit customer and employee exposure to COVID-19.
The OCC told banks that it would not penalize institutions that “temporarily close or otherwise reduce access to a facility because of staffing challenges or to take precautionary measures,” although it encouraged banks to do their best to minimize service disruptions.
The FDIC told its banks that while it preferred as few service disruptions as possible, the agency would accept the use of "alternative service options" should bank branches begin to close. The FDIC also said that if "operational challenges persist," it would commit to working with state authorities and "operate temporary facilities to provide more convenient availability of services."
