U.S. banks are pushing the Federal Reserve to change the terms of a $600 billion lending program for small and medium-sized businesses, including reducing minimum loan sizes and allowing more flexibility on underlying reference rates, industry groups said.
FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis
As part of that program, banks will make loans to eligible small and medium-sized businesses and the Fed will then purchase 95% of the loan via a special-purpose vehicle. The Fed asked for public input and has said it may change the terms if necessary. On Friday, Reuters reported that some funds from a separate program to cover small businesses’ payroll appeared to have gone to some states and companies in less need of the cash.
“The minimum loan amount should be no higher than $100,000. Otherwise, Main Street businesses and community banks will not participate,” the ICBA wrote in a letter published on Friday.The Fed has said banks must price the loans using the Secured Overnight Financing Rate , a newer benchmark that is due to replace the London Inter-Bank Offered Rate next year. But some lenders want to use Libor or other benchmarks, since many have yet to adopt SOFR, the ABA said.
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