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Working Together: Bank Regulators Encourage Flexibility and Offer the Same During COVID-19 Pandemic

Sean Kulczycki, Senior Director Risk and Compliance

It goes without saying that COVID-19 has disrupted the world in a manner not seen before in our lifetimes and has required everyone to make adjustments to their personal and work routines.  In response to the outbreak, bank regulatory agencies in the U.S. have encouraged financial institutions to be flexible and work constructively with customers impacted by these events. In return, the agencies have tempered their oversight protocols to reduce burden on financial institution resources and eliminate, where possible, short-term deadlines.

A significant focus of regulatory communications has been to encourage financial institutions to work with borrowers who are unable to meet their payment obligations due to COVID-19 and its broadening economic impact. This request was made in an Interagency Statement issued March 22, 2020. The Interagency Statement indicates that financial institutions will not be criticized for working with borrowers and mitigating risk through prudent actions consistent with safe and sound practices. The communication specifically addressed troubled debt restructurings (TDRs) and noted that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. Even in cases where modifications result in loans being considered TDRs, examiners will not criticize prudent efforts to modify loans to impacted borrowers.

The regulatory agencies are also encouraging financial institutions to make new credit available to impacted consumers and small businesses. The agencies issued a Joint Statement to this effect on March 26, 2020 highlighting the important role that responsibly offered small-dollar loans can play in covering cash flow disruptions and unexpected expenses during periods of economic distress such as this.

As an additional incentive for financial institutions to work flexibly with customers, the Federal Reserve Board (Federal Reserve), Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a Joint Statement on March 19, 2020 indicating they will favorably consider under the Community Reinvestment Act a financial institution’s efforts to meet the financial services needs of its customers and members in areas affected by COVID-19.

While the banking agencies are asking financial institutions to be flexible in this time of uncertainty, each of the agencies is acknowledging that financial institutions themselves have been equally impacted and is taking active steps to reduce regulatory burden where possible. Outlined below are some of the communications issued over the past few weeks, which provide both guidance and relief to financial institutions:

Federal Reserve

  • Statement on Supervisory Activities – In a statement issued March 24, the Federal Reserve indicated that it intends to minimize disruptions and burden on financial institutions and will conduct examination activities off-site, as well as generally cease all regular examination activities for institutions with less than $100 billion in total consolidated assets. It intends to reassess its approach in the last week of April. With respect to the upcoming Comprehensive Capital Analysis and Review (CCAR) exercise, firms are still requested to submit capital plans by April 6, 2020. Notably, the Federal Reserve’s statement also indicates it is extending the time frames for remediating existing supervisory findings, such as matters requiring attention or provisions within formal or informal enforcement actions, by 90 days unless otherwise noted.
  • Regulatory Reporting Relief for Small Financial Institutions – The Federal Reserve is providing institutions with total assets of $5 billion or less additional time in submitting certain regulatory reports. In a statement issued March 26, the Fed stated it will not take action against such institutions that fail to meet the March 31 deadline for filing their Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) or Financial Statements of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies (FR Y-11), so long as the applicable report is submitted within 30 days of the official filing due date. Financial institutions that anticipate using this extension are encouraged to contact their Reserve Bank.


  • Frequently Asked Questions (FAQ) – The FDIC has issued a FAQ for financial institutions affected by COVID-19 (updated as of March 27), which addresses issues related to working with borrowers as well as operational issues impacting financial institutions. In a separate communication issued March 27, the FDIC stated that supervisory and other FDIC activities at financial institutions will continue but will be conducted off-site at least through April 12, at which time they will re-evaluate. Institutions having difficulty responding to supervisory requests due to the pandemic are encouraged to contact their examiner-in-charge or regional director.
  • Annual Reports Required by Part 363 – Part 363 of the FDIC’s Rules and Regulations requires insured depository institutions with total assets of $500 million or more to submit an annual report to the FDIC related to their annual independent audit requirements. The deadline for such submissions is either 90 or 120 days after the end of the insured depository institution’s fiscal year, depending on the institution’s status as a public filer. On March 27, the FDIC issued a statement on Part 363 stating it will not take action on late filings as long as they are submitted within 45 days of the applicable deadline.


  • FAQ Web Page – Similar to the FDIC, the OCC has created a web page with FAQs for national banks and federal savings associations covering bank operational issues and topics related to working with borrowers. At the time of this writing, the OCC has not publicly communicated any reduction in its examination activities or supervisory activities but has encouraged financial institutions to discuss any concerns with their examiner-in-charge.

Consumer Financial Protection Bureau (CFPB)

  • Quarterly Home Mortgage Disclosure Act (HMDA) Data Reporting. As of January 1, 2020, financial institutions that reported at least 60,000 covered loans and applications during the preceding calendar year are required to report their HMDA data on a quarterly basis, in addition to annually. Per the regulation, the first quarterly submission was due by May 30. However, on March 26, the CFPB issued a statement indicating that, until further notice, it will not enforce this quarterly reporting requirement.
  • Information Collection for Credit Cards and Prepaid Account Issuers. Issuers of credit cards and prepaid cards are required to submit certain reports and card agreements on a quarterly and/or annual basis pursuant to CFPB’s Regulations E and Z. On March 26, the CFPB issued a statement indicating it will not enforce the submission of these reports and agreements until further notice.

Federal Financial Institutions Examination Council (FFIEC)

  • Filing Extension for Reports of Condition and Income – The FFIEC has granted relief to those institutions needing additional time in filing their first-quarter Reports of Condition and Income. In a press release issued March 25, the FFIEC stated it will not take action against institutions that miss the first quarter filing deadline as long as the report is submitted within 30 days of the April 30 filing date.

As all readers have undoubtedly experienced, the impact of COVID-19 has been changing on a daily basis from the outset with no sign of changes slowing down soon. We will do our best to keep you informed of important guidance as circumstances continue to evolve. Subscribe to follow updates on this blog, as well as our website.

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