Treatment of Emergency Amendments: Paycheck Protection Program Liquidity Facility and Paycheck Protection Program Loans

Issuing agencies

Abstract

The NCUA Board (Board) is issuing a final rule adopting as final the revisions to the capital adequacy rule and the member business lending rule made under an interim final rule (IFR) published in the Federal Register on April 27, 2020.

Full Text

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<title>Federal Register, Volume 91 Issue 212 (Wednesday, November 4, 2026)</title>
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[Federal Register Volume 91, Number 212 (Wednesday, November 4, 2026)]
[Rules and Regulations]
[Pages 69493-69495]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22538]



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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 702 and 723

RIN 3133-AG16


Treatment of Emergency Amendments: Paycheck Protection Program 
Liquidity Facility and Paycheck Protection Program Loans

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is issuing a final rule adopting as 
final the revisions to the capital adequacy rule and the member 
business lending rule made under an interim final rule (IFR) published 
in the Federal Register on April 27, 2020.

DATES: The final rule is effective on November 4, 2026.

FOR FURTHER INFORMATION CONTACT: John H. Brolin, Senior Staff Attorney, 
Office of General Counsel, at (703) 518-6540 or at 1775 Duke Street, 
Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Background

    On March 27, 2020, President Trump signed the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act) into law.\1\ The law 
provided aid to the U.S. economy during the COVID-19 pandemic. The 
CARES Act authorized the Small Business Administration (SBA) to create 
a loan guarantee program, the Paycheck Protection Program (PPP), in 
response to the economic impact of the COVID-19 pandemic on small 
businesses. The PPP helped participating businesses meet payroll needs 
and utilities, including employee salaries, sick leave, other paid 
leave, and health insurance expenses. Provided that credit union 
lenders complied with the applicable lender obligations set forth in 
the SBA's interim final rule (IFR), the SBA fully guaranteed loans 
issued under the PPP. Most federally insured credit unions (FICUs) were 
eligible to make PPP loans to members.\2\ Under the CARES Act, PPP 
loans received a zero percent risk weighting under the NCUA's risk-
based capital requirements.\3\
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    \1\ Public Law 116-136 (May 27, 2020).
    \2\ Credit unions permitted to make loans under the SBA's 7(a) 
program were automatically approved to make PPP loans. FICUs that 
were not current SBA 7(a) lenders could receive approval by applying 
to the SBA, unless they were currently designated as being in 
troubled condition or subject to a formal enforcement action that 
addressed unsafe and unsound lending practices. Non-depository 
financing providers, such as credit union service organizations, 
could qualify as PPP lenders subject to the requirements listed in 
the IFR.
    \3\ Public Law 116-136 (Mar. 27, 2020).
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    On April 27, 2020, the Board issued an IFR (April 27th IFR) to make 
a conforming amendment to its capital adequacy regulation following the 
enactment of the CARES Act.\4\ As noted, the CARES Act required that, 
under the NCUA's risk-based capital requirements, PPP loans receive a 
zero percent risk weighting. To reflect the statutory requirement, the 
April 27th IFR amended the NCUA's capital adequacy regulation to 
provide that covered PPP loans receive a zero percent risk weight. The 
April 27th IFR also provided that the covered loan could be excluded 
from a credit union's accounting of total assets in its net worth ratio 
calculation if the covered loan was pledged as collateral for a non-
recourse loan that was provided as part of the Board of Governors of 
the Federal Reserve System's (FRB) PPP Loan Facility. The April 27th 
IFR also made a conforming amendment to the definition of commercial 
loan in the NCUA's member business loans and commercial lending rule. 
The Board found good cause to issue the April 27th IFR without advance 
notice-and-comment procedures and with an effective date upon 
publication.
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    \4\ 85 FR 23212 (Apr. 27, 2020).
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    This rule adopts as final the revisions to the capital adequacy 
rule and the member business lending rule published in the Federal 
Register on April 27, 2020.\5\ The Board is adopting this IFR as final. 
Under this final rule, FICUs may continue to assign a zero percent risk 
weight to PPP loans under the NCUA's risk-based capital regulations and 
neutralize the regulatory capital effects of participating in the PPP 
Liquidity Facility (PPP Loan Facility). Because the IFR was effective 
immediately upon publication and the final rule does not require 
affected parties to adjust their behavior before the final rule takes 
effect, the Board is issuing this final rule to address the types of 
matters described in this paragraph with an immediate effective 
date.\6\
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    \5\ 85 FR 23212 (Apr. 27, 2020).
    \6\ 5 U.S.C. 553(d)(3).
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B. Legal Authority

    The Board has the legal authority to issue this final rule pursuant 
to its plenary rulemaking authority under the Federal Credit Union Act 
and its specific rulemaking authority under the various provisions the 
Board administers.\7\
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    \7\ 12 U.S.C. 1766, 1789.
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II. Final Rule

A. Zero Percent Risk Weight for PPP Loans

    The NCUA's April 27th IFR amended the NCUA's risk-based net worth 
rules to reflect the requirement that PPP loans receive a zero percent 
risk weight. In particular, the IFR classified PPP loans as low-risk 
assets. Under prior Sec.  702.106(d), low-risk assets received a zero 
percent risk weight.\8\ In addition, Sec.  702.104(d) defined low-risk 
assets as cash on hand (for example, coin and currency, including 
vault, ATM and teller cash), the National Credit Union Share Insurance 
Fund deposit, debt instruments unconditionally guaranteed by the NCUA, 
and loans issued under the SBA's PPP.\9\ Thus, the April 27th IFR 
provided that PPP loans received a zero percent risk weight under the 
NCUA's risk-based capital rules as required by the CARES Act.
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    \8\ 12 CFR 702.106(d).
    \9\ 15 U.S.C. 636(a)(36).
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    The NCUA's 2015 final rule regarding risk-based capital (2015 Final 
Rule) \10\ went into effect on January 1, 2022,\11\ making substantial 
changes to the NCUA's previous prompt corrective action (PCA) 
requirements under part 702 of the NCUA's regulations. Among other 
changes, the 2015 Final Rule eliminated the definition of ``low risk 
asset'' under Sec.  702.104(d). To account for this change, in a 
December 23, 2021, final rule on capital adequacy (December 2021 Final 
Rule), the NCUA gave covered loans issued under the SBA's PPP a zero 
percent risk weight.\12\ This amendment finalized the change made to 
the previous PCA regulations by the April 27th IFR, thus this final 
rule does not affect the changes that were made by the NCUA's December 
2021 Final Rule and no further amendment is required.
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    \10\ 80 FR 66626 (Oct. 29, 2015).
    \11\ 84 FR 68781 (Dec. 17, 2019).
    \12\ 86 FR 72784, 72801 (Dec. 23, 2021).
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B. Definition of Total Assets for Purposes of Calculating the Net Worth 
Ratio

    Pursuant to section 13(3) of the Federal Reserve Act, the FRB 
authorized each of the Federal Reserve Banks to participate in the PPP 
Loan Facility as a means to provide liquidity to small business lenders 
and the broader credit markets, help stabilize the financial system, 
and provide economic relief to

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small businesses nationwide.\13\ Through the PPP Loan Facility, each of 
the Federal Reserve Banks extended non-recourse loans to eligible 
financial institutions to fund PPP loans. Under this construct, only 
PPP loans that were guaranteed by the SBA with respect to both 
principal and interest and were originated by an eligible institution 
could be pledged as collateral to the Federal Reserve Banks. 
Participation in the PPP Loan Facility affected a FICU's balance sheet 
because, as a function of participating in the PPP Loan Facility, the 
FICU was required to originate and hold PPP covered loans (that is, 
assets that are eligible collateral pledged to the Federal Reserve 
Banks) on its balance sheet.
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    \13\ 12 U.S.C. 343(3).
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    As a result, FICUs that participated in the PPP Loan Facility could 
potentially be subject to increased regulatory capital requirements due 
to the increase in total assets from originating and holding PPP loans. 
To facilitate use of the PPP Loan Facility, the April 27th IFR allowed 
FICUs to neutralize the regulatory capital effects of PPP loans pledged 
to the PPP Loan Facility.\14\
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    \14\ The Office of the Comptroller of the Currency, the FRB, and 
the Federal Deposit Insurance Corporation adopted a similar IFR to 
allow banking organizations to neutralize the regulatory capital 
effects of participating in the PPP Loan Facility. See, 85 FR 20387 
(Apr. 13, 2020).
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    Additionally, the Board believed that holding credit unions to the 
regulatory capital requirements for those PPP loans did not reflect the 
substantial protections (including the non-recourse nature of the FRB's 
extension of credit to a FICU) from risk provided to credit unions by 
the PPP Loan Facility. The Board believed that it was appropriate to 
exclude pledged PPP loans from regulatory capital.\15\ Accordingly, the 
April 27th IFR excluded PPP loans pledged as collateral to the PPP Loan 
Facility from the definition of total assets in Sec.  702.2 for 
purposes of calculating a FICU's net worth ratio.
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    \15\ The Board has broad authority to define the term ``total 
assets.'' While 12 U.S.C. 1790d defines ``net worth''--the numerator 
for determining the net worth ratio--it does not define the term 
``total assets,'' which comprises the denominator of the equation. 
However, the Board has elected to define the term in part 702. In 
addition to the Board's broad authority to define the term ``total 
assets,'' the Board finds that given the unique and unprecedented 
nature of the COVID-19 pandemic, encouraging use of the PPP Loan 
Facility by excluding pledged PPP loans from total assets would 
further the purpose of section 1790d. Pledged covered PPP loans 
present less risk and would potentially facilitate resolving the 
problems of credit unions at the least possible long-term cost to 
the National Credit Union Share Insurance Fund compared to non-
pledged covered PPP loans.
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    As discussed previously, when the NCUA's 2015 Final Rule \16\ went 
into effect on January 1, 2022,\17\ it made substantial changes to the 
NCUA's PCA requirements under part 702 of the NCUA's regulations. Among 
other changes, the 2015 Final Rule eliminated the PPP loan provision 
that had been added by the April 27th IFR under the definition of 
``total assets.'' \18\ To account for this change, the definition of 
total assets in 12 CFR 702.2 was amended by the NCUA's December 2021 
Final Rule to carry forward the PPP-related change made in the April 
27th IFR. Specifically, under the NCUA's December 2021 Final Rule, the 
definition of total assets in current Sec.  702.2 was amended to 
explicitly state that PPP loans pledged to the FRB's PPP Loan Facility 
to support PPP lending are excluded from the definition of total 
assets.\19\ This finalized the change to the definition made by the 
April 27th IFR. Accordingly, this final rule does not affect the 
changes that were already made final by the NCUA's December 2021 Final 
Rule.\20\
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    \16\ 80 FR 66626 (Oct. 29, 2015).
    \17\ 84 FR 68781 (Dec. 17, 2019).
    \18\ Specifically, the 2020 IFR updated the previously effective 
Sec.  702.2 and the definition of total assets; however, the IFR did 
not update the definition of total assets that became effective on 
January 1, 2022.
    \19\ 86 FR 72784, 72802 (Dec. 23, 2021).
    \20\ Id.
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C. Definition of Commercial Loan

    The April 27th IFR clarified that PPP loans would not constitute 
commercial loans under part 723 of the NCUA's regulations. Commercial 
loans are generally defined as any loan, line of credit, or letter of 
credit (including any unfunded commitments), and any interest a credit 
union obtains in such loans made by another lender, to individuals, 
sole proprietorships, partnerships, corporations, or other business 
enterprises for commercial, industrial, agricultural, or professional 
purposes, but not for personal expenditure purposes.\21\
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    \21\ 12 CFR 723.2.
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    The current definition also provides various exclusions. The April 
27th IFR amended the commercial loan definition to add PPP loans issued 
under the CARES Act as an exclusion from the definition of commercial 
loan in Sec.  723.2. While other federally guaranteed loans may still 
be considered commercial loans under the regulation, the unique nature 
of PPP loans mitigates the need for enhanced commercial underwriting of 
these loans. The SBA's IFR specifically limits each lender's 
underwriting obligation under the PPP to the items noted in the 
rule.\22\ Lenders are also held harmless for any borrower's failure to 
comply with PPP criteria and, in addition to the 100 percent guarantee, 
PPP loans may qualify for loan forgiveness.
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    \22\ See, <a href="https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule">https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule</a>.
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    The NCUA received no comments opposing this amendment made by the 
April 27th IFR to the definition of commercial loan in Sec.  723.2. 
Commenters generally discussed that PPP loans are unique and the rules 
governing the PPP loans specifically limited the lender's underwriting 
responsibilities. One commenter said that applying the enhanced due 
diligence of the NCUA's part 723 to these loans is of little 
supervisory benefit. For these reasons, the Board is adopting as final 
the changes made to the definition of commercial loan made by the IFR. 
Accordingly, this rule makes final the sentence in the definition of 
``commercial loan'' under Sec.  723.2, that excludes from the 
definition covered loans issued under the SBA's PPP.\23\
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    \23\ 15 U.S.C. 636(a)(36).
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Regulatory Procedures

A. Executive Orders 12866, 13563, 14192

    Pursuant to Executive Order 12866 (``Regulatory Planning and 
Review''), a determination must be made whether a regulatory action is 
significant and therefore subject to review by the Office of 
Information and Regulatory Affairs (OIRA), within the Office of 
Management and Budget (OMB) in accordance with the requirements of the 
Executive Order.\24\ Executive Order 13563 (``Improving Regulation and 
Regulatory Review'') supplements and reaffirms the principles, 
structures, and definitions governing contemporary regulatory review 
established in Executive Order 12866.\25\ This final rule was drafted 
and reviewed in accordance with Executive Order 12866 and Executive 
Order 13563. OIRA has determined that this final rule is not a 
``significant regulatory action'' as defined by section 3(f) of 
Executive Order 12866.
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    \24\ 58 FR 51735 (Oct. 4, 1993).
    \25\ 76 FR 3821 (Jan.21, 2011).
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    Executive Order 14192 (``Unleashing Prosperity Through 
Deregulation'') requires that any new incremental costs associated with 
new regulations shall, to the extent permitted by law, be offset by the 
elimination of existing costs associated with at least 10 prior 
regulations.\26\ This final rule is not an Executive Order 14192 
regulatory action because this rule is not significant under Executive 
Order 12866. This final rule

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is considered an Executive Order 14192 deregulatory action.
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    \26\ 90 FR 9065 (Feb. 6, 2025).
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B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include credit unions with assets less than $100 
million) \27\ and publishes its certification and a short, explanatory 
statement in the Federal Register together with the rule. Moreover, 
rules for which notice and comment procedures are not required are not 
subject to the RFA's requirements, including conducting a regulatory 
flexibility analysis.\28\ Consistent with the APA,\29\ the Board 
determined for good cause in the IFR finalized by this rulemaking that 
general notice and opportunity for public comment is unnecessary and, 
therefore, the Board did not issue a notice of proposed rulemaking. 
Accordingly, the Board has concluded that the RFA's requirements 
relating to initial and final regulatory flexibility analyses do not 
apply.
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    \27\ See 80 FR 57512 (Sept. 24, 2015).
    \28\ 5 U.S.C. 603 and 604.
    \29\ 5 U.S.C. 553(b)(3)(B).
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    Nevertheless, the Board fully considered the potential economic 
impact of the regulatory changes during the development of the rule. As 
noted in the preamble, the final rule adopts as final the amendments 
made by an IFR. The rule will not impose any new significant burden on 
FICUs. Accordingly, the NCUA certifies that this final rule will not 
have a significant economic impact on a substantial number of small 
FICUs.

C. The Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) generally provides that 
an agency may not conduct or sponsor, and not withstanding any other 
provision of law, a person is not required to respond to, a collection 
of information, unless it displays a currently valid Office of 
Management and Budget control number. The PRA applies to rulemakings in 
which an agency creates a new or amends existing information collection 
requirements. For purposes of the PRA, an information-collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement. The NCUA has determined that the 
changes in this notice do not create a new information collection or 
revise an existing information collection as defined by the PRA.

D. Executive Order 13132 on Federalism

    Executive Order 13132 encourages certain agencies to consider the 
impact of their actions on state and local interests. The NCUA, an 
agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the 
executive order to adhere to fundamental federalism principles. This 
rule finalizes the amendments made by the IFR. It does not, however, 
rise to the level of material impact for purposes of Executive Order 
13132 given that the rule makes no forward-looking changes to the 
NCUA's regulations.

E. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998) given that the rule makes no changes to the NCUA's 
regulations.

F. Congressional Review Act

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (also known as the Congressional Review Act or CRA) 
generally provides for congressional review of agency rules.\30\ NCUA 
must submit a report to Congress and the Comptroller General when it 
issues a final rule, as defined by the CRA.\31\ An agency rule, in 
addition to being subject to congressional oversight, may also be 
subject to a delayed effective date if the rule is a ``major rule.'' 
OIRA has determined that this final rule is not a major rule as defined 
by the CRA.\32\
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    \30\ 5 U.S.C. 801-808.
    \31\ 5 U.S.C. 804(3).
    \32\ 5 U.S.C. 804(2).
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    The delayed effective date required by the CRA does not apply to 
any rule for which an agency for good cause finds (and incorporates the 
finding and a brief statement of reasons therefor in the rule issued) 
that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.\33\ For the same 
reasons noted above with respect to an immediate effective date in 
adopting this final rule, NCUA is adopting the final rule without the 
delayed effective date generally prescribed under the CRA.
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    \33\ 5 U.S.C. 808.
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List of Subjects

12 CFR Part 702

    Banks, banking, Credit unions, Reporting and recordkeeping 
requirements.

12 CFR Part 723

    Credit, Credit unions, Loan programs--business, Reporting and 
recordkeeping requirements.

    By the National Credit Union Administration Board, this 2nd day 
of November, 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.

PART 702--CAPITAL ADEQUACY

PART 723--MEMBER BUSINESS LOANS; COMMERCIAL LENDING

    Accordingly, the interim rule amending 12 CFR parts 702 and 723, 
which was published at 85 FR 23212 (Apr. 27, 2020), is adopted as final 
without change.

[FR Doc. 2026-22538 Filed 11-3-26; 8:45 am]
BILLING CODE 7535-01-P


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