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U.S. banks to score accounting, capital relief in $2 trillion rescue package

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WASHINGTON (Reuters) - The U.S. banking industry is set to get relief from a new global accounting rules standard, a small-bank leverage charge and other lending rules with the expected passage of a record $2 trillion congressional stimulus package in coming days.

The financial services industry, including big banks, community lenders, credit unions, and payday and auto financing lenders, joined a frenzy of lobbying on Capitol Hill in recent days as lawmakers rushed to craft the record package to prop up the economy amid chaos wrought by the novel coronavirus.

While many of the industry wins in the legislation, which awaits approval by the U.S. House of Representatives, are temporary, lobbyists hope the measures will pave the way for longer-term relief on a number of regulations they have long opposed.

“Although banks will face a number of market headwinds, there are a handful of notable victories in this package for depositories,” said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading.

In particular, the bill allows banks to delay complying with a new accounting standard which the industry has been trying to kill for years, saying its requirement that lenders estimate potential future losses on loans could exacerbate liquidity stresses.

Community banks also scored a win with a temporary lowering of their leverage ratio from 9% to 8%, the level the industry had been pushing for when the rule was finalized last year.

In addition, the bill reprises a measure from the 2008 financial crisis by allowing the Federal Deposit Insurance Corporation (FDIC) to temporarily guarantee debt issued by banks it oversees, as well as guaranteeing all deposits in non-interest bearing bank accounts.

That is on top of the interest-bearing accounts with up to $250,000 in deposits that the agency already insures.

The bill would also temporarily direct the Office of the Comptroller of the Currency to scrap limits on how much banks can lend to a single client, and cements regulatory guidance issued last week temporarily waiving higher capital charges when banks restructure distressed debt.

The legislative relief follows a flurry of measures from banking and markets regulators to ease up on lenders so they can continue to dole out credit amid a sharpening economic slump. While the measures are temporary, analysts, lobbyists and consumer groups believe some may ultimately stick.

In a statement on Thursday, government watchdog Public Citizen said that while flexibility was warranted amid the coronavirus outbreak, it was “concerned about exemptions that can create systemic risks.”

Reporting by Pete Schroeder in Washington; Editing by Michelle Price and Matthew Lewis

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