Fed Releases Wells Fargo From PPP Loan Cap

09 Avril, 2020, 04:07 | Auteur: Auguste Feret
  • Pedestrians pass in front of a Wells Fargo & Co. bank branch in New York U.S. on Monday

The Fed said in a release Wednesday that it would not count the bank's lending activities through the SBA program and the forthcoming Main Street Lending Program against the $1.95 trillion cap for the duration of the two credit facilities.

On Sunday, Wells Fargo & Company said it has "reached its capacity of $10 billion to lend under the PPP". Any requests for loans submitted after April 5 will not be considered, according to the bank.

Before the Fed made the change, small businesses who banked with Wells Fargo reported that, because of the structure of the program, they were having difficultly getting the loans at other banks in the midst of the novel coronavirus pandemic.

Since the program launched on Friday, most US banks are processing loans only for existing clients.

Wells Fargo has been barred from growing its assets above $1.95 trillion for more than two years, but representatives have pushed the Fed to suspend the cap, at least on temporarily, to give it more flexibility to lend during the coronavirus crisis.

Friday was the first day that American small businesses hit by the fallout from the coronavirus pandemic could start applying for loans under the new US program.

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Scharf noted in the statement that Wells Fargo already extended nearly $70 billion in new and increased commitments and outstanding loans to consumers, small businesses and corporations in the USA last month. Any proceeds the bank gets from the programs need to be returned to the Treasury Department or to a nonprofit.

This post has been updated with additional details from Wells Fargo's statement.

As of Sunday evening, Citibank was still not accepting loan applications. The bank said it planned to especially target its lending under the the program to businesses with fewer than than 50 employees and to non-profits. He also stated that the board did not intend to remove the cap until Wells Fargo implemented sufficient remedies. The company cited capital restrictions imposed in 2018 by the Federal Reserve Board, after it was caught creating phony accounts, among other compliance issues.

Why it matters: One of the nation's biggest lenders said the Fed's asset cap prevented it from lending more to struggling small businesses as part of the government's aid package. But it appears the Fed has declined to change its stance.

"While we are pleased to be able to help more small businesses through the Paycheck Protection Program, we note that the Federal Reserve's action does not - and should not - in any way relieve us of our obligations under the consent order", said CEO Charlie Scharf in a statement, referring to the 2018 Fed order punishing the bank. "We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like".

Over the weekend, Bank of America said it had received 185,000 loan applications on the first day and a half of the program, seeking a total of $30 billion.

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